Thursday, 11 February 2010

Increasing the cost of new expression

In my Economics and Current Policy Issues lecture on copyright, I point out that strengthening the duration or application of copyright both increases the returns to created works and increases the costs of creating new works; I usually point out the list of artists who'd have to be paying royalties to Pachelbel's heirs for ripping off the chord progression from Canon in D (or, more likely, who wouldn't have created their songs at all) were copyright too strictly applied.

Club Troppo this morning points to the ridiculous Australian case where Men at Work now owe compensation (to be determined) to the copyright troll, Larrikin Music, who bought the rights to an old Australian folk song. "Down Under" includes an 11 note flute sequence from the folk song, substantially transformed (change of key and timing), as homage to Australiana. Think of it as having a tilt of the hat to "Yankee Doodle" somewhere in another piece of Americana music.

We're rapidly hitting the point where no copyright at all is preferable to the copyright we've got. There is an optimal level of copyright. If we want to maximize the number of new works created, we want to maximize the distance between the curve tracing the costs of creating new works and the curve tracing the returns from having a newly-created work: the first increases at an increasing rate with protection while the second increases at a decreasing rate with protection. If we want to maximize social returns, we choose a level of copyright at a level slightly lower than that to decrease monopoly deadweight losses on the stock of existing works.

We're well past the point where the marginal social benefit of increased copyright protection is negative. How much longer before the integral is negative too?

Very nice analysis throughout the Club Troppo piece, which also points me to this bit of awesomeness which I'll be using in subsequent iterations of my Econ 224 class in lieu of my humming the tunes...


How much of the classical canon would be banned for lilting references to the works of other composers had the 17th and 18th centuries had our asinine levels of copyright protection? As Club Troppo notes:
If Justice Johnson’s decision is used as a precedent to set standards of similarity then it will lead to every composer who writes in the key of D Minor paying a royalty to Beethoven’s family estate. Luckily though, Beethoven’s music is not copyrighted so Billy Joel was able to take the second movement of his ninth symphony Sonata Pathetique and turn it into a great song. He may not have bothered, if it had involved copyright infringement. Nor perhaps would With or Without You by U2 and about 35 other well known hits that use the standard 1-5-6-4 chord progression be commercially viable.

If the unknown slave who first played 12-bar blues had only known a lawyer his descendants would be richer than Bill Gates. Or, more likely, 12 bar would have died completely because the bar performers of New Orleans would avoid the cost and play something else. The artististic conversation between musicians which generates musical movements would become impossible.

Which brings us to the question of where the net public benefit lies with copyright for music at all. Personally I think there is none and that their is a huge cost in the free exchange of musical ideas. And I think that this case reveals the double edged sword of music as property. Many musicians have supported the music industry’s campaign to outlaw downloads of their songs. They may find themselves on the wrong side of the same property laws that they champion – when they discover the painful truth that their songs are not really so original after all.
Copyright is broken, broken, broken....

6 comments:

  1. "If we want to maximize social returns, we choose a level of copyright at a level slightly lower than that to decrease monopoly deadweight losses on the stock of existing works. "

    Can you explain this a little more?

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  2. Certainly! Think of it this way. Once a work is created, charging any price above the cost of reproducing the work is suboptimal as it just confers a rent on the creator (not in any pejorative sense: a payment not necessary to bring the work into existence...as the work is in existence, any payment above reproduction cost is a rent). Ok. In the current period, we have a large stock of existing works and a large stock of works that could potentially be created if the return were high enough. The level of copyright stringency that maximizes current production of new works also confers a very large rent to the rights holders for existing works and means that a suboptimal number of works are consumed (monopoly losses). So the optimal level balances consumer losses from monopoly on the existing works against consumer losses from works that fail to come into existence due to insufficient monopoly on yet-to-be-created works. Weighing only the latter gives you a higher level of copyright protection than a balancing of the former and the latter.

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  3. Excellent, I thought that's what you meant. :)

    I would only add that that I think it should be 'much lower', not 'slightly lower'. The marginal returns to consumers of new art are probably very small above the huge stock of existing art.

    We like new art not because it is better art, but because it is fashionable and provides opportunities to express our identities and have conversations about whatever art everyone is consuming now. New artists create so much new art in large part because they want to be more famous than others (zero sum game that one). Art producers work hard to make new art the Shilling point for everyone who wants to partake in the conversation about art; alas there is almost nobody pushing out-of-copyright art for that purpose.

    In the absence of so much new art the Shilling point would move more slowly and we would recycle old art more aggressively, and consume a greater proportion of whatever new content was created. I bet that the change in enjoyment from art would be very small.

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  4. @Robert: I can certainly agree that most of the point of new works is to create those new focal points for fashion, but I'd also be hesitant to dismiss too quickly the utility fad followers get from fad following.

    Unfortunately, the political economy of it is that most rents go to holders of existing stocks, so they fight hard for supra-optimal protection.

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  5. Could you post a graph with a rough approximation of what you mean when you say: If we want to maximize the number of new works created, we want to maximize the distance between the curve tracing the costs of creating new works and the curve tracing the returns from having a newly-created work: the first increases at an increasing rate with protection while the second increases at a decreasing rate with protection. If we want to maximize social returns, we choose a level of copyright at a level slightly lower than that to decrease monopoly deadweight losses on the stock of existing works.

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  6. Take my Econ 224 class! I put it up on the whiteboard! It's also likely in Landes & Posner....

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