IP and effective incentive

Intellectual property is an institution of increasing importance and prominence in the age of the information economy. The most common reason given for its existence, as its justification, is the need for artists and authors to be rewarded for their efforts in producing what is nowadays called IP.

While this sounds praiseworthy and just, there is what I think of as ample reason to believe that IP is a bit more complex than most people make it out to be. In fact, there is reason enough to suspect that IP isn’t property at all, but something very different. Here I’ll try to chart out some of my objections to the common treatment of IP‐related issues, and to present two goals with respect to it. The first is a short term one, and consists of radical limitations to the current publicly enforced intellectual property framework. The second is a long term one, and aims at outright abolition of all IP rights, combined with total reliance on appropriately limited contractual law and technological progress to keep the information market alive. The purpose of this article is to add to the ongoing debate among open source advocates and freedom‐of‐bits libertarians, perhaps bridging it with some unlikely libertarian and economic reasoning.

My starting point is a combination of libertarian moral and utilitarian–contractarian economic analysis. I intend to explore the crucial differences between ordinary material goods vs. immaterial, and claim that the latter is a far more complicated and interesting beast than the former. The argument will be based on risk management, incentive and a cricism of the conventional neoclassical conception of markets, with a fringe of transaction cost reasoning. It turns out that this view is a fruitful one, giving sound economic backing to most of the commonly advocated alternative business models in IP. It also ties the production of intellectual commodities to established methods of risk mitigation, making effective markets possible in the absence of the limited monopoly currently granted the author.

IP economics

‐incentive analysis
 ‐expected net gain
  ‐different for each good and artist
 ‐when do we want incentives, when only to avoid disincentives?
  ‐artists cannot be paid to produce good art, medical companies perhaps can
‐base investment and running costs are highly differentiated
 ‐production costs a lot, replication is practically free
 ‐hence, all returns on IP are monopoly profit by the normal token
  ‐IP isn’t an economic good
   ‐we presuppose we have to have it, but do we?
‐extra units of a given information good will not give extra utility
 ‐now this is very strange; nobody’s thought of this before, I think
‐"seeing is it having it"
 ‐IP cannot be described without samplers
‐"giving a taste of the good thing"
 ‐getting people used to a product will aggravate switching costs
‐the normal litany of alternative means of production
 ‐"the one wealthy financer"
 ‐sell service, not software
 ‐tie the software to physical goods
 ‐tie the public good to a public bad
‐each information good can be largely seen as giving rise to a new market
 ‐et cetera; factor the argument out, and refer to it
‐physical property is a faulty metaphor
 ‐it doesn’t take from someone if something is copied from him
‐transaction costs
 ‐books which are persistently out of print
  ‐more likely an effect of a monopolistic reduction of supply?
  ‐fake capitalization to make the books balance out?
‐IP and externalities
 ‐there is no market for creation, only for copies
  ‐all the positive effects of creation come from externalities
 ‐intellectual goods suffer from a serious tragedy of the commons
 ‐OTOH, monopolies lead to anti‐commons trouble as far as recombination of
  existing material goes
‐conservative solutions
 ‐a balancing act between producer and consumer
  ‐term limits
  ‐fair use rights
  ‐free noncommercial use
  ‐broader rights to make derivatives
  ‐defaulting to no copyright
  ‐registration requirements
‐alternative models
 ‐forced revelation of the author’s preferences
  ‐taxation and binding bids on author‐set value
   ‐perhaps forced duplication of rights ‐‐ cf. severability restrictions
  ‐might counter transaction costs, might not counter monopolistic profit
 ‐purely contractual copyright
  ‐efficiency questions
  ‐the cost of enforcement argument
  ‐capitalizing risks into the breach fee
 ‐plagiarism and impersonation considered as fraud
 ‐restrictions on severability of IP rights
‐societal implications
 ‐current system
  ‐breeds winner‐take‐all economies?
   ‐contrast britneys with local bands going on gigs…
  ‐breeds incremental, societal development of culture?
   ‐"back to tribal"?
‐the clash between physical and intellectual property
 ‐there is not information without a physical substrate
 ‐giving rights to information necessarily limits physical rights to property
  ‐physical property rights are a complete system
  ‐intellectual property rights could be made a complete system
  ‐these two systems are very much at odds
   ‐it isn’t clear whether a mixture is something we want
‐freedom of thought, association and press
 ‐seem to imply the unlimited right to copy

Copyright as a risk assignment tool

‐copyright as a risk assignment tool
 ‐the traditional model of production for physical goods is a one where the
  producer carries the risk
  ‐the producer is the one to invest, or
   ‐there are also investors who carry the risk
  ‐it is sensible then that the producer takes the profit as well
  ‐IP is a legislative way to effect protections against the customers
   leaving without paying up
   ‐this cannot be accompished via other laws since copying is what counts, and
    only information can be copied without significant cost
  ‐hence, if we wish to abolish IP, the first question is whether there are
   other ways to share the risk, or guarantee that the customer behaves as
   ‐this is the common nature of law: erecting predictable behavioral patterns
    with the most efficiency that is possible when self‐organization does not
    suffice, or is too costly/bloody
 ‐when we sell something where the transaction is difficult to organize and
  there is a risk that the consumer will leave without paying for the good, the
  price is commonly paid up front, without any extra protections
  ‐typical examples would comprise most bulk services, like fastfood bills,
   movie tickets, et cetera
  ‐when the customer can flee, or the good can be destroyed in the transaction,
   the payment is performed beforehand, or there is sharing of risk
 ‐in the case of information, the situation is analogous to the bulk service
  one, except that it is more serious
  ‐if the customer flees, there is a definite chance that the whole product will
   be destroyed via unauthorized copying, socialized
  ‐hence, the risk will have to be carried entirely by the customer
  ‐furthermore, even the first customer to be given the product will incur a
   serious risk
  ‐hence, the money will have to be collected before the development ever starts
  ‐this leads directly to collective patronage, and models where the product is
   financed in an incremental fashion (proof of concept at a finer
   ‐e.g. corporation finance in case the company can keep the product under
    wraps till release
   ‐the current investment infrastructure has the concept of funds
  ‐contractual obligation and futures are other ways to deal with the
   who pays?‐aspect
   ‐the current investment infrastructure can already carry this business model,
    as there are mutual funds/trust funds/public bonds/foundations (collective
    investment) and futures/insurance (as vaccine against failure)
 ‐this way, one can make a significant profit in software production, even while
  there is no IP legislation
  ‐furthermore, competition is more fair since there are no monopolies
   ‐M$ cannot happen
   ‐competition will force efficiency
   ‐it will also kill standards bloat arising out of corporate interests and
    personal vanity
  ‐users have a direct participatory role in development, subscription, and the
   eventual terms of release
   ‐open source is implicit in this model, since customers likely won’t tolerate
    closed systems, and a closed end‐product would drive a company bankrupt
   ‐open systems and simple, common standards will fare better since no sane
    person would lock themselves into a proprietary solution
  ‐this system has a check for bloat and unneeded features, as the producer will
   not get payed if the system is too expensive
  ‐excessive cost and development time will be forced to go down
  ‐the idea is not all‐or‐nothing, since software can be versioned and
   developed incrementally/modularly
  ‐tragedy of the commons
   ‐everybody has an incentive to flake, expecting other to pay
  ‐contractual obligation
   ‐you can’t flake, or you’ll go to jail
  ‐subscription services
   ‐open source development does an immense number of versions, making the
    product more like a service/performance which we already know we can work
    through subscriptions/freshness assumptions
   ‐public input before the projects are even started
   ‐the power of general goodwill in overcoming minor obstacles
   ‐corporate investment
    ‐special rights for bail‐out corporations
     ‐what can these be in the complete absence of IP protection?
  ‐specialized brokers between producers and consumers
   ‐more planning and input before projects are started, and while they are in
   ‐as advertisers
   ‐as organizers of democracy
  ‐trade secrets
   ‐you simply do not get to enjoy the product, since it is secret by default
    ‐is this really something we want?
 ‐hence, IP is not necessary, and we already know the harms
  ‐in contrast with current views, we can treat intangibles much like we would
   services and other currently known products
‐extra stuff against IP as property, etc.
 ‐information should not be ownable
  ‐there is no scarcity and money is a tool used to manage scarcity
  ‐information is not something that is usually produced by isolated individuals
   ‐all scientific and artistic work is based on the work of others
   ‐wide dissemination of information is essential to the creation of new
    information, as is easy, cheap access
   ‐the information economy is a feature of social evolution
    ‐it relies on trial and error, and is highly unpredictable
    ‐unproductive parts of the economy need to survive
    ‐this is only possible if information is free (both senses)
    ‐as an evolutionary system, human culture is an integrated whole; this means
     that no single invidividual may have a monopoly on any of its parts
 ‐what reason do we have to believe that while private property is a necessary
  institution for commerce, the similar institution of IP is not necessary for
  the information economy?
  ‐not much: man has produced information as long as human culture has existed,
   quite without restrictive IP rights
 ‐convenience and accessibility are major things!
  ‐people only pay for entertainment if payment is extremely easy
  ‐this is a case for lowered transaction costs
  ‐payment is not easy if you have to go to the store to get what you heard
   in your friend’s house; nor is it easy if you can’t buy just the piece you
   wanted without the extra eleven on the CD
 ‐it is unfair that consumers must treat information as scarce while producers
  can treat it as it is
  ‐if consumers cannot copy, producers should not be able to, either
 ‐mere replication is never enough, which makes copying real
  ‐there is always editing
  ‐the more there is information, the less people are willing to pay for it
  ‐in fact, well filtered information is what people need
  ‐producing this is work
   ‐producing a filtered stream of information is a service with a real value
   ‐it should be valid payment for more information to be produced, or
  ‐we see this principle in that few people copy each other’s entire MP3
   libraries, but as for recommendations and help copying
   ‐hence, even digital copying is limited, and even more so when information
    is less scarce than it is today
  ‐hence, production of information can be payed by distribution, without going
   through monetary values
   ‐an extension and justification of Barlow’s brilliant idea
 ‐entertainment: the expression, or form, is the idea
  ‐in the current society, "mere" expression is often the final outcome of the
   intellectual good consumed
  ‐the only way to create, based on this, is to use techniques of collage and
   ‐i.e. when the "idea" cannot be separated from the expression, as is the
    case with factual literature, we are applying far too strict a standard if
    we demand originality ‐‐ it is the same as completely forbidding references
    in scientific work
  ‐information where expression and idea cannot be separated is much more
   common than the other kind ‐‐ this subsumes all art and entertainment, as
   viewed in IP
   ‐this means that only culling the ideas of traditional factual IP for the
    commons will actually limit most of the useful, socially tested, and
    functional information out of reach
  ‐we might in fact go as far as to argue that aesthetic content is actually
   functional: it’s only role in communication is to provoke pleasurable
   feelings. hence, it should no more be copyrightable than a drug, or a
   ‐this is important when we notice that the producer is currently permitted to
    copy indefinitely, the consumer is not, and that expression is valued above
    ‐infinite duplication of newly found expressive idioms is encouraged
    ‐expression is encouraged at the expense of discouraging production of
     totally novel ideas, especially in areas where expressivity is king, and
     new forms of expression for old ideas are considerably easier to find than
     totally new ideas
     ‐mindless, repetitive entertainment like sitcoms and all‐about‐love pop
    ‐this leads to consumerism, and production of expression hogging the
     resources we’d likely allocate to get new ideas, if we could
     ‐this is the probable basis for copyright et al. originally being limited
      to useful arts, instead of whatever information can be conceived
 ‐with lots of information around, the value of an idea is not necessarily in
  its uniqueness, but availability
  ‐this implies that the mere existence of an idea is not enough to guarantee a
   working commons, but that we in fact need to open expression to the public
   as well
 ‐IP does give an incentive to produce, but also guides what kinds of
  information to produce
  ‐cf. the trouble anti‐obscenity crusaders are having
  ‐cf. pure vs. applied research
 ‐IP is not property
  ‐property exists as a tool for the management of scarcity
  ‐physical goods can be copied without fear of reprisal
  ‐it is the work that is scarce, not the product
   ‐how do we separate these two without killing the incentive? that is the real