Re: copyright expiration as a spur to creativity

On 14 Aug 1998 Dan L. Burk <burkdanl[_at_]shu.edu> wrote:
>
> On 8/13/98, Albert Henderson <noblestation[_at_]compuserve.com> wrote:
> >
> > On 11 Aug 1998, Dan L. Burk <burkdanl[_at_]shu.edu> wrote:
> > >
> > > On 8/10/98, Albert Henderson <noblestation[_at_]compuserve.com> wrote:
> > > >
> > > > The plain English "breaking even" to describe "beyond recouping
> > > > their investment" or "pricing at marginal cost" is not
> > > > inaccurate.
> > >
> > > It is if you are using the term "breaking even" to exclude the
> > > cost of using money, which you apparently are.
> >
> > Not at all. The cost of using money is better represented by the
> > prime rate than by growth and earnings of investments.
>
> This statement is nonsensical. The prime rate is, so far as anyone
> can tell, a completely arbitrary number made up by Alan Greenspan.
> If you are making reference to interest rates generally, then they
> represent the cost of using money for those purposes. The rate of
> return on other types of investments, such as equity, represents the
> cost of using money for those purposes, which are generally riskier.

If this were so, profits generated by a more robust copyright law would be no more than the cost of invested resources. You should have no problem with extending the term.

For the "cost of money" most businessmen that I know see the prime rate as a recognizable reference point.

> > Interest on loans is tax-deductible. Are earnings?
>
> How is the tax code relevant here?

The tax code and GAAP define profits and allowable expenses like interest paid a the cost of using money.

> > Any businessman faces choices of investing in X, Y, Z, or leaving
> > his resources in the safety of government bonds. A chance at
> > maximizing profit -- with pricing well above marginal cost --
> > should be more compelling than other opportunities.
>
> Yes, it unquestionably would be. It will also be subject to SEC and
> FTC actions for fraud and/or and antitrust action.

Maximizing profit is legal and proper.

> > Patents, copyrights, and other protections of property support such
> > investments.
>
> The fraudulent ones? Or the antitrust violations?

Are you saying patents, copyrights, etc are fraudulent or violate antitrust?

> > > With regard to the question of profits, the source of your
> > > confusion once again appears to be failure to distinguish
> > > accounting profits from economic profits. "Profits" in the sense
> > > that you appear
> > > to use the term are simply the cost of using capital (or sometimes
> > > labor). When the investors are paid off, the business in fact
> > > should in fact do no more than "break even."
> >
> > You should say "if and when investors are paid off." The reality
> > is that many publishing companies run in the red and authors'
> > contributions to their copyrighted work far exceeds the income
> > derived. Many properties end up as remainders or shredded paper.
>
> Assuming that this representation is true, how is it relevant to
> other than to demonstrate that many publishers apparently offer goods
> that the public does not want at the price necessary to print and
> distribute those goods?

It is relevant insofar as it represents the downside of the gamble. The possibility of great profits is accompanied by great risks. It is not outlandish for a publisher to overproject sales, print too many copies, and wind up with a loss after the returns are all in. If the projection were realized in the marketplace, profits would be high. It is a risk of profit or loss.

Your idea that simply "recouping their investment" or "pricing at marginal cost" is justification to eviscerate copyright is unrealistic in terms of investors' goals.

> > Given the importance of the copyright industries to education,
> > science, social, and cultural interests, I believe investors
> > should have every encouragement possible under protection of law.
>
> The system you are apparently suggesting ("every encouragement
> possible under protection of law") has been tried. In Britain, it
> was called "crown monopolies." We had a revolution prompted in part
> by it. I would much rather stick with "reasonable encouragement,
> where necessary." I am chary of artificial subsidies for goods no
> one really wants.

So why would increasing the profit opportunities for the full diversity of authors, musicians, and artists be so bad?

> > > > David Packard (of Hewlett-Packard) even sits as co-chair of the
> > > > President's Committee of Advisors on Science and Technology and
> > > > enjoys a general waiver of normal conflict-of-interest
> > > > restrictions. No publisher sits in such a powerful insider
> > > > position as far as I know.
> > >
> > > Why is this in any way relevant to the discussion?
> >
> > What is it that singles out "content-oriented" publishers for
> > criticism while "conduit-oriented" information technology firms
> > are encouraged to make all the profits they can?
>
> You are repeating yourself, sir. You have yet to offer any
> explanation as to 1) who, if anyone, singles out "content-oriented"
> publishers for criticism, 2) who, if anyone, encourages
> "conduit-oriented" information technology firms to "make all the
> profits they can, 3) how one could possibly tell the difference
> between the two types of firms you are referencing, and 3) how this
> has any imaginable relevance to the optimal term of copyright, which
> is what we were supposedly discussing in this thread.

Answers:

1. Your opposition to strengthening copyright law singled out content oriented publishers for criticism, saying they should be content with "recouping their investment" or "pricing at marginal cost." You see copyright owners as not worthy of rights granted to landlords, farmers, and manufacturers.
2. Your unqualified support of the process of copying in spite of its devestating effect on the value of creative works puts you on the side of encouraging conduit-oriented information technology firms to make all the profits they can at the expense of copyright owners.
3. I don't believe you can't tell the difference.
4. Maybe the information technology industry should pay authors and artists a royalty, since much of their business is generated by uncontrollable piracy.

> > > > You call patent rights an "unwarrented degree of market power
> > > > due to some competitive failure?"
> > >
> > > I suggest that you carefully re-read the paragraph above, or, if
> > > necessary, have someone assist you in carefully re-reading it.
> > > You will find that I do not call patent rights an unwarranted
> > > degree of market power due to some competitive failure, nor in fact
> > > do I mention patent rights at all.

Patents are key to H-P's (and similar firms') competitive edge. They are what separates certain products from commodities which are dependent on supply and demand for prices and profits.  

> > The IT companies I mentioned depend on patent rights to sustain
> > high prices and enormous profits. You re-read.
>
> First, you have yet to show the relevance of these alleged high
> prices and enormous profits to the optimal term for copyrights.
> Second, given the extremely complex economics of patentable
> innovation, your representation that patents are the key to "high
> prices and enormous profits" in the IT industry is extremely suspect,
> and I would be curious to see any evidence you have to support that
> claim. And finally, to the extent that the supposed "high prices
> and enormous profits" are unwarranted for that industry, they are
> candidates for antitrust correction (which may now be ocurring in
> with Intel and Microsoft), which is fully consonant with my earlier
> statements on the subject.

High profits: For its 3rd quarter, H-P earned $621 million. The NY Times called it "profit," not "cost of using money," by the way.

Patents: Your demand for evidence that patents are the key to high prices and enormous profits is ridiculous. With good patents in place, Xerox Corporation dominated the photocopy market for many years. IBM dominated the electric typewriter and mainframe computer markets. Intel domniated PC chips. H-P dominated the laser printer market, etc.

> > > > If you are against copyrights, I guess you might as well be
> > > > against
> > > > patents for the same reasons.
> > >
> > > You are once again indulging in inferences that are unsupported by
> > > anything except your own biases. At no time have I stated that I
> > > am "against copyrights." Hence, it cannot follow that I am
> > > "against patents for the same reasons," since no such reasons
> > > exist.
> >
> > On Wed, 29 Jul 1998, Dan L. Burk <burkdanl[_at_]shu.edu> wrote:
> > >
> > > They will, but why should they have to? The point is that the
> > > consumer is better off if the good can be made available for
> > > free, or nearly free -- and it can be, once it is created.
> > > Consequently, consumers of the good should only have to pay for
> > > it to the extent necessary to induce the creator to create it
> > > in the first place. 100 or more years of monopoly rents are
> > > probably not necessary to induce creation -- something less than
> > > that will probably suffice.
> >
> > 'Nuff said.
>
> Please particularly point out and distinctly show anywhere in the
> paragraph you quote where I state that I am "against copyrights"
> (Hint: the paragraph quoted states that I believe there is a strongd
> justification FOR copyrights, so this task may be difficult. Take
> your time. I can wait. I am waiting.

You clearly reject strengthened copyright that would increase creators' income.

Albert Henderson, Editor, PUBLISHING RESEARCH QUARTERLY 70244.1532[_at_]compuserve.com Received on Tue Aug 18 1998 - 18:34:34 GMT