Saturday, January 21, 2012

"Should we have copyright laws?" I don't know.

The other night I wrote an op-ed for the Daily Caller, which got titled, "Should copyright laws exist at all?". As I was limited to just 500 words, there are a few things that people - in the comments particularly - have brought up that I'd like to address on my blog.

First read my "controversial" piece here (I've modified it slightly so that the video links appear embedded as videos, rather than as hyperlinks like they did in the original):
"Whenever politicians get especially excited in naming a piece of legislation, it’s a pretty safe bet that the bill will do the opposite of whatever the name says.

With a bill as gratuitously titled as the “Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act” (otherwise known as PIPA), you can be certain that the only “economic creativity” being protected here is that of the special interests pushing the bill.

In this case, the special interests behind PIPA, and the equally disturbing “Stop Online Piracy Act” (SOPA), are mostly media and entertainment industry giants like the Motion Picture Association of America and the Recording Industry Association of America.

But contrary to the industry claims, these bills do nothing to protect artists and creators like me and actually make it harder for us to innovate and generate new works.

I’ve spent my entire adult life in the media and entertainment industries — as a composer and musician, as a writer and as a video producer. Yet every year as I see more and more examples of cronyism where big media companies work with politicians to squash small producers and consumer freedoms, I grow increasingly skeptical of the very idea of “intellectual property.”

Copyright and patent protections and anti-piracy laws are always couched in language of property rights and fighting “theft.” As a libertarian working in the field of libertarian activism, it’s probably fair to say that no one believes in private property rights more than I do. But there are two big problems with this framework when applied to IP.

First, copying isn’t theft.

If I steal your bicycle, the harm done to you is not that I now have a bicycle to ride, but that you don’t and all the time you took working to earn money to acquire that bicycle is gone too. But if I copy your bicycle, we both have something to ride.

In economic terms, copying increases the supply of a good that’s available to consumers whereas theft is only redistributive. That’s a big distinction conveniently glossed over by the IP laws’ supporters, who generally want you to believe that copying an MP3 and stealing a CD are the same thing.

The second major problem is that you can’t actually “own” an idea unless it stays in your head.
The minute you share an idea with anyone, it’s no longer “yours” in any meaningful sense. Ideas replicate, mutate and evolve when they’re shared from one person to the next. This is what Matt Ridley (author of “The Rational Optimist”) calls “ideas having sex,” and this is exactly what has taken human culture and material wealth out of the Stone Age and produced the amazing standards of living we all enjoy today. New ideas in art, music, science and technology — or in any other field — don’t come fully formed out of nothing; they’re incrementally built on the shoulders of previous inventors and creators.

So when you try to stop people from sharing ideas (which is exactly what SOPA and PIPA would do), you’re putting a damper on the spontaneously ordered innovation that will make our lives even better in the future.

You’re also setting up incentives for some creators to spend more time and money suing people ($31 billion a year, according to Stephan Kinsella) than they spend producing better-quality products. In this way IP law stifles creativity and keeps potential innovators chained down.

If you want an example of this, go check out “Beauty and the Beast in 3D,” which is in theaters now."
Now, I understand that for a lot of people, these kinds of arguments engender a lot of knee-jerk rejection, but rather than calling me a "marxist", as one commenter did, let's actually get into this a bit more.

First of all, it's one of the more hilarious things that happens to me on a relatively regular basis that when I take a position that is out of the mainstream "conservative" vs. "liberal" standard manual of talking points, someone inevitably gives me a counter argument that I first heard in 2nd grade as if it would blow my case out of the water.

For example, the guy who called my piece "marxist" writes:
"If I spend $100 recording a song and 100 people buy a copy for $1, I can afford to make another song. If I spend $100 recording and 100 people copy it off of the internet for free, I can't afford to make another song."
...and along the same lines, another commenter wrote:
"take a three or four years writing a novel and then have somebody slap their name on it and see if it seems like you've not been harmed."
Because, of course, there's no possibility that I have considered either the basic math or what it feels like to produce creative works. Never mind that I've spent the last 10 years - my entire adult life - working in media and entertainment as a video producer, a musician, a composer, a music supervisor & editor and as a writer. Never mind that I've done these jobs working with multi-million dollar clients & accounts like McDonald's, Honda, Chevy, Holland America and others... Never mind that I have written & recorded literally hundreds of songs, classical/jazz works, and film scores, and produced at this point a few hundred video products.

I obviously just don't know what it's like.

Was that too snarky? Ok. Maybe a bit... But seriously... I get that some people were going to find my viewpoint a little controversial, but this stuff gets really ridiculous very quickly. Moreover, those are seriously flawed arguments for two fundamental reasons.

1. They mistakenly presume a Labor Theory of Value. 

This is to say that they presume that merely by doing some action, like writing a book or recording a song, you are entitled to compensation for that work. But that's not actually how value is determined in society.

Value is determined, primarily, by the end-user of a product and there are many factors that go into the end-user's final determination. This is a key insight of the Austrian school economists from Carl Menger through Ludwig von Mises that has been a major contribution to the field.

As most of the commenters innately understand, supply availability matters. If you can only watch a particular movie at a theater, where everybody is watching a single copy of one print of the film then you may be willing to pay more for it. However, if you can see that same movie on your phone, your computer, your TV, your iPad or iPod, etc. and the supply is so widely available that you can see the film anywhere, anytime, that movie isn't scarce and really can't command a particularly high price.

I think most people realize that when supply has been expanded to near infinite capacity of any good, the price drops precipitously.

As I got to thinking about this issue today, I realized that what we're really dealing with here is the Diamond-Water Problem or the "Paradox of Value" which mystified classical economists like Adam Smith & David Ricardo, but which was finally really cracked by Eugene Böhm-Bawerk and the widespread understanding of Menger's theory of Marginal Utility.

For those who don't know what I'm talking about, the point is that for any good that you might ordinarily value, each additional unit of that good is worth less and less.

So for example, if I'm particularly thirsty, a liter of water might be very valuable to me in terms of trade (I'd pay a lot for it). But after I've quenched my thirst with that first bottle, each subsequent bottle that is available to me is worth less and less until it's worth nothing at all... Meaning, I'd pay you say $10 for that first bottle if I'm insanely thirsty, and I'd pay $5.00 for the second bottle when I'm much less thirsty, and once I was no longer thirsty at all I might still pay you a few dollars for a third bottle to plan ahead for being thirsty in the future... But unless I want to walk around with your entire supply of water bottles (I don't), a fourth or fifth (let alone 100th) bottle is not valuable to me at any price.

This explains why scarce diamonds are worth thousands of dollars to people who want to get a girl to marry them, but water - which is generally available most everywhere in abundance - is worth very little in dollars, even though it's a major requirement for life.

The literal reality of innovations in digital distribution of media is that movies and music, paintings and even ebooks just aren't worth what they are when the only places you could get access to them were in movie theaters, concert halls, galleries & libraries.

On the upside, all of this stuff gets a distribution network that artists and creators even 20 years ago could only dream about. So while maybe you won't make as much money (or sometimes even any) off of distribution, your exposure potential is far higher - which certainly in my case, has led to more work-for-hire doing projects I actually want to do.

I experimented once with a business model that involved getting people to buy videos I made for a $2.00, and the fact is, the handful of people who were willing to pay such a small price considered it a donation, and not a payment (and most of those actually paid a lot more than $2.00).

The point of all this is to say that the price of my work - and yours, and everyone else's, no matter what field your'e in - has nothing to do with how much time, effort or skill went into it. The only thing that matters is how much other people value it, and that's a purely subjective concern on the part of a potential buyer.

Marx got this point way wrong and built a remarkably flawed philosophy around the idea.

If you spend $100 recording a song, and that song is worth $0 dollars to all prospective buyers, you have either spent $100 doing something you wanted to do for yourself as a passion project, which is just consumption spending (and isn't a bad thing!)... or... you've missallocated your resources on an investment that didn't pan out. Nobody owed it to you to pay you back for the money you put in.

Now... It is true and sometimes unfortunate that when creative destruction happens, people get displaced (I've been displaced myself more than once by changes in the music business), but this only brings me to the other crucial point my commenters seem to have missed...

2. Nobody is guaranteed a living off of their actions

This aspect might seem harsh, but here's the point: You have a fundamental right to pursue a livelihood doing any old thing you want, but no right at all to be able to force other people to pay you. If that's being a fancy investment banker, a race car driver, a musician, a street juggler or a plumber, the choice is up to you.

You're probably going to make that choice on the basis of a ton of factors, such as what skills you have, what your interests are, what your threshold for stress is, whether you like to be outside or inside, whether or not you want a boss or you want more flexibility in your day, and of course how much you need to get paid to fund the type of lifestyle you want to have.

If you are a composer (like me), and you want to be some kind of jet-setter... your options today are:
  1. Write seven #1 chart-topping albums in a row and get a knighthood.
  2. Don't be a composer.
Seriously... Not to be too blunt about it, but if you want to make a ton of money, then maybe a career in music just isn't for you. Those who do make a giant pile of money in the arts are doing so in a field that has always been insanely competitive and in which success on the level of an Elton John (whose net worth is like $320 million) or a big-name film composer (John Williams and Danny Elfman, for instance, can bring in around $2,000,000 per score) tend to be the result of an nigh-impossible combination of skill, perseverance, tenacity, supportive friends & family and preternaturally timed good luck.

If you're going into the arts as a career, as I often tell younger guys interested in going to film & music schools, then you need to go in expecting to be poor and to struggle.

It's not a career path for people who want to make a ton of money.

The simple reason for this is because, going back to point #1, value is subjective - and the value of art to potential buyers is far more widely disparate than almost anything else. At least with something like energy (however it's produced), people all tend to need it. Some need more than others to meet their desired ends, but everybody is vying for it on one level or another.

A lot of this just comes down to Maslow's Hierarchy of Needs, right? You need energy because the base planks in that pyramid - food, shelter, income through work, etc. all require energy production to be created. So all the goods that go into those base needs are going to be pretty widely and consistently valued by a lot of people.

But it's only at the top of the pyramid - after (most) people have met all their other needs - that they get to creative pursuits.

And once we're talking about creativity, it gets even worse for artists because consumer tastes vary so much.

This is why commercial artists who appeal to the "lowest common denominator" with pop music and big popcorn summer blockbusters get paid a ton, and modernist classical composers who write weird aleatoric or atonal music, documentarians and art-house filmmakers tend to make nothing. I had a professor as an undergraduate who always seemed a little bitter about not being widely rewarded for his compositions... He was an excellent composer, no doubt, and his knowledge of music was substantial. But he also wrote music that was weird and unintelligible to laypeople. So... For my money, any expectations of financial reward were always unfounded.

At the end of the day, making a ton of money is really just a function of how many people value what you create, and how much of their own efforts they're willing to trade for it. If you want to see this in terms of a formula, it's really just about as simple as:

n(P) = I

Here, "n" is the number of people who want to buy your product, "P" is the price they're willing to pay, and "I" is your income.

You can get a millions of people to want to pay you a little bit or you can a couple people to pay you millions (or any combination in between), and your income will be huge. But what you can't do is get rich by creating a product few people are willing to pay for at all. When competitive pressures push prices down to the level they're at in film & music, then you are going to get paid less unless you can get more customers.

This doesn't seem like a particularly radical statement, but apparently (given the comments on my op-ed) it's not very clearly understood.

Like I said above, you have every right to compete with anyone you want in making a living doing any job you want. But you can't force people to pay whatever you want them to for your product. So, if the market has valued your good at $1.00 a unit as iTunes has demonstrated over the last several years with MP3s, then you need to figure out how you can work out a business model based on that (essentially, you need to find a way to get a lot of customers).

If you can't do that, then you need to make a living some other way.

* * * * *

Now... There's one other comment I want to deal with here, because it's yet another major misunderstanding of the issue and actually a really interesting point. The comment was this:
"What if I copy a dollar bill? Is that theft? If I copy your music and use it in my films, stage shows and night clubs, you get nothing - is that your business model? So, your thesis is that you (and everyone else) should work for free. Should doctors and dentists work for free too? You can do what you want, but reasoning from your particular to our general is not convincing."
First of all, I do like that the implicit recognition is that printing a ton of dollar bills renders each individual dollar worth less. Not to go on a whole tirade about the inevitable results of expanding the money supply like Ben Bernanke has tried to do the last 3 years, but the fact is when you balloon the supply of anything, the value of each unit drops - including money.

So that's a good point... although it actually supports my case above in terms of understanding supply & demand and their effect on monetary value. Supply of intellectual property since the internet has exploded. Thus, the price dropped. Hardly anything unpredictable from an economic standpoint.

But counterfeiting is different precisely because money is the medium of exchange and not the end goal of the exchange. So increasing the supply of a currency in that way harms people because it distorts their ability to to acquire the goods & services they value and improve standards of living...

However, increasing the supply of goods available raises people's standards of living.

Surely that's an important distinction to anyone who understands that the point of production is not to give people "jobs", but to give people valuable goods & services like food, shelter, clothing and eventually music, art and other forms of entertainment, enlightenment & fun. If you increase the number of dollars in circulation, but not the amount of goods, all you do is make goods more expensive - this is bad for everyone. If, however, you increase the supply of goods in circulation but not the amount of dollars, you've made goods less expensive. As long as we can agree that people having better standards of living is the goal, this is good for everyone!

And that brings me to the final point regarding this comment... Should everyone work for free?

Yes and no. I would love it if we lived in a world where medical and dental services were so widely and easily available that they could be acquired for almost no cost. High cost is, after all, the big impediment in America to people accessing quality health care, is it not?

If, for example, someone could invent some kind of Star Trekian "replicator" for medical devices, or even just for splints and band aids, we'd be much much better off as a result. If cancer medication was produced at such a scale, by so many different producers that it cost $10 a treatment instead of thousands... this, in my view, would be wonderful!

But the implication of the comment above is that this would be bad because some people would have to change jobs or wouldn't get paid as much as they do today.

This copyright-infringing picture Captain Picard & Commander Riker sum up my feelings on that idea:

Anyway, no... People should not be conscripted into working for nothing... But if their job becomes outmoded then they can't force people to pay them like the relic gas station attendants in Oregon or New Jersey. So yes, people should get paid when they are doing something the market values... No, they shouldn't get to compel you to pay them when they aren't.

Creative destruction happens, and we all need to get over the scary aspects of it because the benefits are huge. The infinite reproduction and free-flow of information is an amazing thing that should not be underestimated as a source for human innovation and development going into the future. I used to not appreciate the OpenSource community as much as I do now, but I'm starting to see how cool it all really is. Unless some huge draconian government crushes information exchange, we're poised for a fantastic explosion of innovation.

Yes, some people are going to have to find other ways to make a living off of creating information products. I do it by working for hire, and getting paid on the front-end of my projects rather than in drips and drabs through royalties. Then I move on to the next project.

One other way to keep revenue coming in as an artist is to provide better quality live experiences which people value and want to buy. For instance, take the comedian and radio/TV host, Adam Carolla. His podcast is recognized by the Guiness Book of World Records as the #1 most downloaded podcast of all time. But he doesn't charge listeners a cent for it.

Distribution to the end-user is free. He is paid by advertisers (which is an obvious answer) and by doing live appearances - which are rivalrous and scarce, and thus command about $90 a ticket (or so the concert hall down the street where he'll be appearing next week would like me to believe).

There's nothing wrong with that and perhaps that's the right model for some people going forward.

However, I should be clear that it's a giant mistake for people to ask me what the "right" model is, and it's an even bigger mistake of me to try to guess.

The only correct answer is: I don't know.

The point of a free market economy is that it's a system where people try different models in a competitive environment and see which ones work and which don't. There are feedback mechanisms in prices, in profits & losses, and in observing the revealed preferences of consumer choices. All I know at the moment is that the 20th-Century media distribution model isn't working. It's up to a new generation of entrepreneurs and artists to figure out how to be professionals in the 21st-Century, not up to me to decide for them.

It's spontaneous order, not central planning, not... So we'll see what emerges!

At any rate, this is a monstrous continuation of a 500 word piece, so I want to close by just saying that everything I said at the Daily Caller was itself a copy of ideas that were never originally "mine" at all. Like everyone else, I built my ideas on those of men and women who came long before me.

Here's Thomas Jefferson, in a letter to Isaac McPherson, wrote in 1813:
"It has been pretended by some, (and in England especially,) that inventors have a natural and exclusive right to their inventions, and not merely for their own lives, but inheritable to their heirs. But while it is a moot question whether the origin of any kind of property is derived from nature at all, it would be singular to admit a natural and even an hereditary right to inventors. It is agreed by those who have seriously considered the subject, that no individual has, of natural right, a separate property in an acre of land, for instance.

By an universal law, indeed, whatever, whether fixed or movable, belongs to all men equally and in common, is the property for the moment of him who occupies it, but when he relinquishes the occupation, the property goes with it. Stable ownership is the gift of social law, and is given late in the progress of society. It would be curious then, if an idea, the fugitive fermentation of an individual brain, could, of natural right, be claimed in exclusive and stable property.

If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me."
Jefferson - the father of American IP law - understood what I'm talking about now pretty well, it turns out.

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