When I hear people in the traditional music industry decrying the increasingly common notion that music should be free my first impression is to say “So what?”. If they control access to the music then such notions are not relevant. Alas it is not so simple. Technical means to control access to ‘intellectual property’ (IP) are ad-hoc and are deteriorating. I think that the great success of capitalism depends to a significant extent on voluntary compliance with property rights, even for abstract intellectual property. Property rights to non rivalrous goods have especially enjoyed this voluntary compliance out of what may be a cultural or innate sense of justice. The cost and inconvenience of duplicating published works, together with copyright law and this sense of justice, has until recently adequately supported a significant economic engine for intellectual property.

It is no longer inconvenient to copy most intellectual property. Copyright law is no longer easy to enforce and does not clearly delineate what actions are illegal in a world where technology routinely copies data as a necessary step in the legitimate delivery of IP to people. Case law moves much more slowly than technology. Even if people were highly inclined to pay for their own copy, the transaction cost would often dominate the value transferred to the IP owner. (Perhaps the Digital Silk Road might reduce the transaction cost, but I wouldn’t bet much on that proposition.) The notion that IP should be free seems irresistible in the presence of easy copying. I plead guilty. The commercial IP engine is sputtering. Jessica Litman has many interesting points and proposals.

The news is not all bad. New and vital sources of IP arise when the cost of publishing decreases dramatically. These low costs flow largely from the same technology that eases copying. Some deprecate the quality of such material but I sense that those voices are mostly among those who have made a profession of producing IP in the classic economic mold, academics included. Yet I will be disappointed if the economic IP engine of the future fails to produce such works as Disney’s “Monsters Inc.”.


The flip side of the tendency towards observing the ‘property rights’ of others, is that of ‘entitlements’. I thought myself immune to such dumb ideas until I recalled my outrage upon moving to a town with parking meters for the first time. I was 14 years old and my father had already explained to me how supply and demand led to prices, which properly encouraged or discouraged supply and consumption of goods. I recall thinking that this was neat. Yet my sense of entitlement to parking on city streets overwhelmed my understanding of a good market mechanism to allocate scarce parking space. It was perhaps 10 years before I noticed the conflict in my own thinking.

It was this anecdote that convinced me that psychological entitlements are a real and significant policital-economic phenomenon. The entitlement to free music is with us and other IP seems likely to follow. I have even recorded some unique ideas at this site of how to control access of IP; yet I am not optimistic about the feasibility.

‘Rivalrous Goods’

It is not clear to me that the this phenomenon will be limited to IP. Some years ago there were laws proposed (and I think passed) that required auto insurance companies to pay the monopoly prices of replacement parts charged by the original manufacturer of the automobile. The ostensible rationale was that other parts were inferior and the consumer was thus protected.

It seems clear that this was mere rent seeking disguised as consumer protection. An explicit contract with the auto buyer that spare parts must be bought exclusively from the producer would have been an honest alternative, but most likely resisted by the consumer. The pattern is perpetuated today in ink jet printers that include extra circuitry to degrade output if ink cartridges from third parties are used.

3D ‘printers’ are being slowly introduced to build objects from digital input. Today the resulting parts are made of material that is not very strong. Six axis milling tools can produce many parts from strong metals given digital descriptions. Today both of these technologies have high incremental and capital costs, but the costs are declining. I foresee the day when I can find on the web the ‘numerical tool instructions’ to reproduce some part of an antique automobile which has failed. This is a bit like the economic conundrum of orphan books with no identifiable copyright owner. Even when the owner is known the practice may be hard to prevent, even if there were a law to prohibit it. Should there be such a law? Perhaps cars and printers are already predominately IP. It is conceivable to build a car from entirely ‘open-source’ parts. Presumably some parts of such a car would be produced in factories specialized for those parts. It seems clear that this is not on the immediate horizon.

See this about a maverick Republican. This is the controversial memo.


As a libertarian market-oriented arm-chair economist, I worry about the shape of 21st century economics where an increasing part of new wealth is non-rivalrous. How do the producers of this IP make a living. It is at best inefficient for them to rely on a ‘day-job’ at which they may not be adept. A scheme where they could capture even a few percent of the wealth that they produce would immensely increase their collective (SIC) production. Sometimes a producer of open-source IP may sell a proprietary version to a proprietor, or even produce an open variation customized to proprietary hardware for payment, but this is not a very general solution. The Canadians have a scheme whereby recording media are taxed to benefit some politically-defined class of artists. I won’t go further to say why I reject this solution. Academia, for all its faults, harbors an important class of IP producers. Often government labs and sometimes private labs do useful things until some bureaucrat notices that those things are not in the charter and cancels the program. The law of supply and demand is beginning to fail us and I see nothing to take its place. It is all rather haphazard!

The Bright Side

The era of computers and Internet has produced great wealth which has mostly escaped the investors that were largely responsible for its production. Most of the surplus value has gone to the consumers. Even so many, perhaps most of the investors responsible for this wealth have done very well. If this wealth were included in economist’s GDP figures most would be astonished and most classic uses of GDP figures would be warped. I don’t advocate this for income to investors is still absolutely vital to our economy.

Other ideas