Re: royalties without copyright--the historical case

Lee Daniel Crocker (
Wed, 26 Mar 1997 16:13:09 -0800 (PST)

> PF:
> "Functioning markets existed for foreign authors in the U.S. in the 19th
> century. The free market paid royalties to British authors even though
> those authors received no copyright protection in the US until the
> extension of copyright protection to foreigners in 1891. The American
> publishers paid the royalty in order to obtain advance galleys, even
> though they themselves had no legal protection against competitors who
> could legally copy their new releases and sell them. In the absence of
> state protection the authors and publishers used several voluntary and
> contractual arrangements for the internalization of externalities."

> DF:
> There is an important difference between the situation then and now. With
> 19th c. printing technology, there were large fixed costs and sizable time
> lags. The authorized publisher, who got the manuscript in the U.S. before
> it was published in Britain, could pay his fixed costs out of the early
> sales. A pirate would have to duplicate those fixed costs. The authorized
> publisher could then issue a "fighting edition"--a low cost second edition
> priced low enough so that the pirate would never make back his costs.
> With current printing technology, absent copyright, the pirate's costs are
> much lower than the original publisher's, since he can use photo offset or
> something similar to free ride on the original publisher's layout,
> proofing, etc. So that method doesn't work.

Yes, costs are different now. But so, too, is the value of timeliness, and
for the same reasons. When it took months to distribute a book, that book
was still "new" to its consumers a year after publication. In the age
of the photocopier and television, new books, magazines, movies, and other
works lose their novelty that much quicker, and thereby increase the value
of being first to market. In the age of the Internet, live stock quotes
are very expensive, but 20-minute old stock quotes are free. Tickets to
live performances or ballgames continue to sell in spite of the fact that
television coverage is so good, because immediacy has value.

As the artworks themselves grow more complex, access to "source code"
in the loose sense becomes more valuable as well. This applies not just
to software where the originator can always out-support and out-fix his
competitors without source access, but even to things like movies, where
access to the original uncomposited negatives, unreleased scenes, and
unpublished story line allowed the makers of Star Wars to make millions
with a an improved re-release of a 20-year-old movie. It is hard to make
that case for books--but even there I can imagine being able to retain
certain information that makes updates easier or makes interviews with
the real author more interesting (and therefore more valuable), or for
having more interactive content somehow (900-number reader polls, etc.)

So yes, technology changes the numbers, but it does so on both the
pro-copyright side and the anti-copyright side. Does it then make sense
to use law to lock ourselves into a system based on the assumptions of
older technology?

> As this example suggests, whether alternatives to IP protection work, and
> how well, depends on details of the associated technology. Certainly there
> are alternatives. But I don't think one can say, a priori, whether relying
> on them will produce plenty of intellectual property, an inefficiently but
> not catastrophically low level, or practically none--it depends.

That argument can apply to any government interference in the market.
What one considers an "adequate level" of invention and writing is just
as debateable as what one considers an adequate level of food or
housing. Libertarians generally concede that free-market solutions
work for all other goods. Why not for inventions?

Of course, inventions are different--that is the basis of my own
argument in the first place, so I cannot simultaneously say that the
property/idea analogy fails in one argument, then use the same analogy
in this one. But I think it is still fair to assume on principle
that interference is unnecessary until proven otherwise, and the proof
is just not there. I understand from your contributions to HPO that
you are less swayed by moral arguments than pragmatic ones, but when
there are moral arguments on both sides, pragmatic arguments on both
sides, and little solid evidence for either, the principle on which
I assume the absence of IP law is not one of libertarian morality,
but just Occam's Razor.

> On the subject of first mover advantages, my favorite quote is from
> Kipling's "Mary Gloster," possibly his best poem:
> "They asked me how I did it and I gave 'em the scripture text
> 'You keep your light so shining a little ahead of the next,'
> They copied all they could copy, but they couldn't copy my mind,
> And I left them, sweating and stealing, a year and a half behind."

Thanks. I have an epigraph for chapter 4 now. :-)

> On the economics of IP protection, people might be interested in my Dayton
> Law Review article on Standards, on my web page, and in the discussion of
> IP in the lecture notes for my L&E course (current and last quarter's
> course visiting at Stanford), also on my web page.

Yes, they were interesting. Both, though, seemed more to describe how
IP works, and what its effects are likely to be, but neither seemed to
spend any serious effort questioning the idea in the first place. Which
is fine--I understand that you're somewhat agnostic on the issue.

> "But as Friedman and others have
> shown with more detailed economic analysis, the net gains are
> always less than the net losses, because a subsidy changes the
> relative value of the commodity subsidized, leading to inefficient
> trades in every business affected by that commodity."
> It's tricky in the copyright case. You get an inefficiently low level of
> production and consumption of those books that are written, since the price
> includes royalty although the marginal cost to the author of having one
> more copy sold is zero. But you move the number of books written closer to
> the efficient level, because you raise the reward to the people who bear
> the fixed cost of producing books (author and publisher) closer to its real
> value to the users. So you are losing on one margin and gaining on the
> other.

Agreed. But there are thousands of other tansactions influenced beyond
those of just book producers and book consumers. Every cost-shifting
we make effects other choices those individuals might make in their
lives from choosing education to choosing a career to choosing a burial
plot (or cryo-tank, in my case). I think legal restraint in the absence
of good evidence is called for in this case.

> I think it is worth distinguishing two features of IP law--the fact that it
> protects certain things that may or may not seem like property, and the
> fact that enforcement is in part paid for by the government.
> Suppose we ignore, for a moment, the question of enforcement cost, and just
> ask whether the enforcement itself is a bad thing. One obvious answer is
> that IP is a substitute for contractual arrangements that most of us would
> approve of if it were practical to enforce them. An author could, after
> all, sell his book with an explicit shrink wrap license, binding the buyer
> not to reproduce the book, not to permit others to reproduce the book, and
> making the buyer liable for damages to the author if his copy does get
> reproduced, with or without his permission. If that contract could be
> enforced, it would be very much like copyright law. The practical problem
> is that when pirate copies get out there is usually no way of proving whose
> copy got pirated (a problem that may be soluble for some digital works,
> incidentally), and the guilty party, if located, may be judgement proof. So
> if one approves of the results that would be produced by such a contractual
> regime, if enforceable, it is hard to see why, from a consequentialist
> standpoint, one should reject the same results when produced by IP law.

That's a good way to recast the argument: let's assume that the (C) is
just a shortcut for the whole shrink-wrap license version of IP (for the
moment ignoring broadcasts and billboards). The question then becomes,
Is it in the best interest of authors in general to put the mark on their
books? This is a much harder question, and if the answer is "yes", then
much of my argument against IP weakens, because I will then have to draw
in enforcement costs and moral arguments and such. I still believe that
the answer is "no", but it forces me to clarify the benefit more. A work
to which the (C) is attached will probably increase the /relative, short-
term/ wealth of the author. That is, he will likely be wealthier as
compared to his neighbor in the year of his book's publication than he
might have been without the (C). But the /absolute, long-term/ wealth
of the author I believe would still benefit more from leaving the (C) off.
This is because the ability of everyone else in the economy to exploit
the work without restraint in ways he might not even have thought of, or
ways he might not understand or approve of and so would fail to license,
would improve the whole economy the well beyond what relative gain he might
have enjoyed from protection, by lowering the price and raising the
quality of everything he buys, and speeding the discovery of new things.

This is a psychological dilemma: we /feel/ more wealthy if it is
relative to others at the same time, but absolute wealth is what we
actually have to spend. I suspect this is the motivation of many
attempts to close market entry, like licensing and regulation.

Lee Daniel Crocker <>  <>
"All inventions or works of authorship original to me, herein and past,
are placed irrevocably in the public domain, and may be used or modified
for any purpose, without permission, attribution, or notification."--LDC