Hayek was right. Twice.

[Sampo Syreeni]

On Wed, 3 Jul 2002, R. A. Hettinga wrote:

>For me, this is all about Coase's theorem, transaction cost, Coase's
>observation that you can't have a market without property,

Quite. Coase's reasoning demonstrated that any initial allocation of
property rights is equivalent (both in the allocative and distributive
senses) when transaction costs amount to nil. So, if we look at the
distribution side of the information industry, you're absolutely right.
The smaller the transaction costs the better -- rivalry applies to any
particular copy, as it does to services involved disseminating the bits.
Any trades required are bilateral, competition does its job and everything
is just dandy.

But if we look at the creation end, that's a different story entirely.
Anyone eventually receiving a copy will benefit roughly equally from the
efforts of the artist/author. If copying and distribution are exceedingly
cheap, as we'd expect them to be in the future, the number of people for
whom acquiring the information would be profitable easily grows to the
tens or hundreds of millions. Since any copy released will be widely
disseminated, the deal between the original author and the public with an
interest in his work will be multilateral in the extreme. It cannot be
reduced into a bunch of bilateral trades as in the case of private
commerce. This means that we get sizable transaction costs. IP is there to
force the economy into something approximating the conventional, material
one, and so internalize externality otherwise generated. (No, it does not
solve the problem. But limited term copyright could still strike a
near-optimal bargain.)

If something, Coase's original point is behind copyright, not its
antithesis. That's why I rarely use economic reasoning to argue for IP
abolition, even when I consider IP a bad idea.

Sampo Syreeni, aka decoy - mailto:decoy at iki.fi, tel:+358-50-5756111
student/math+cs/helsinki university, http://www.iki.fi/~decoy/front
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