On 8/4/98, Pat Sloane <patsloane[_at_]aol.com> wrote:
>
> No problem in disallowing profit if it's to be across the board.
> But you seem to be promoting the idea that favored groups are
> allowed to make a profit and disfavored groups are not.
Quite the contrary -- since intellectual property owners are a "favored group," enjoying market power from a legally created exclusive right that they would not otherwise enjoy, I am promoting the idea that they should not be shown favoritism to any greater extent than absolutely necessary.
> Thus, a creative person is only allowed to "recoup their investment,"
> and you don't even seem willing to allow them to make a living wage or
> support a family besides. But whoever takes what has been created--and
> has NO investment in it to recoup--is allowed to make any profit on the
> created item that the market will bear.
The creative person, like every other person in a market economy, should presumptively only be allowed to recoup their investment. Whether this allows a living wage or support of a family is an entirely different question -- if you want to ensure that, you need Soviet-type artist subsidies rather than copyrights.
This should be clear by applying your statement to a business that deals in any type of tangible goods -- say, lamps. On any given sale, the lamp seller will (given a properly functioning market) only be able to recoup her investment in the lamp. Whether that adds up to a living wage or support for a family simply depends on whether people want lamps at that price. If they don't she will usually need to find another line of business.
> But whoever takes what has been created -- and has NO investment in
> it to recoup -- is allowed to make any profit on the created item
> that the market will bear.
I'm afraid that I'm having a little difficulty following you here. Once the creator of the work has recouped his investment, via copyright, he is in exactly the same position as the person who has no investment to recoup.
At that point they are competing on equal terms, and the public will buy from whichever of them offers the good at the best price. It would be nice if we could start them both off on equal terms, but somebody has to create the work first. So we artifically inflate the price via the copyright to allow the creator to recoup the investment.
But there is no point in continuing to inflate the price once the investment expectation has been realized -- that simply supresses competition, at public expense.
> I also understand you to be saying that a company is allowed to make
> a profit, but the landlord who rents them their business premises is
> not.
Economically, the market (properly functioning) will pressure landlords, companies, or whomever to price at marginal cost. If they are able to price higher than that, then there is a problem in the market and it may be desirable to intervene legally.
Legally, if we decide to intervene in the market, we would usually want to require landlords, companies, or whomever, to price as closely as possible to what a normally funcitioning market would dicate -- usually at marginal cost. In the case of creative works, that isn't possible, because at marginal cost we probably wouldn't have creative works. But there is no reason to "allow" pricing any farther above marginal cost than is necessary to induce cration of the work.
3) It is not entirely clear to me from your statement above, but you are almost certainly confusing accounting "profits" with economic "profit." The former, from an economic perspective, is simply a cost of doing business. The presence of latter signals that something is wrong in the market under consideration.
In other words, if after paying all your costs, including the cost of using investor's money, you have money left over, then either you have more market power than you should have, or you will shortly be undercut by a competitor selling at a lower price.
If you naturally have more market power than you should have, then we may want to legally constrain that market power via antitrust law. If your market power derives from some artifically created advantage, such as copyright, then we need to restrict the scope of your copyright.
If you're pricing your goods so that you are going to get undersold by competitors, then that's your own affair, and you should probably lower your price, or go out of business. Your choice.
> Doctors aren't allowed to do more than recoup the cost of going to
> medical school and paying rent on their offices, etc.
Again, it is not clear what you mean by "allowed," but certainly the market will optimally not allow more than this. Should we choose to intervene in the market, there is no reason for us to allow more than this, and every reason to ensure that we do *not* allow more than this -- which is the point of unfair competition and antitrust law.
> Very unusual economic theory,
No, actually, its' very common, standard, freshman Econ 101 economic theory. See any freshman text. I like Pindyck & Rubinfeld myself.
> and I'm surprised you don't distinguish between self-employment
> income and profit. Could you explain this further?
Distinguish in what way? If your self-employment income doesn't cover the cost of business -- including accounting-type "profits" -- then you will probably find a different line of business.
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