inamerrata

So, since Lessig has commented on the Allen Report, I thought I might too. They mostly have an interesting view on things, but there are two particular claims that stand out as being, well, delusional.

In section 4.1, starting on page 26, the report makes the argument that the increased incentives provided by copyright extension are significant — that is, that they have a measurable effect. This is to counter the obvious economic argument that the difference is so far in the future compared to when the work was created that, using standard discounting techniques, their present value is effectively zero (just as $1 invested now might be worth thousands in 100 years, $1000s of dollars in hundred years is worth just $1 now — and how many people are going to decide not to write a book, just because they miss out on a whole dollar’s compensation?).

The report makes its argument by establishing that the copyright industry is a tough one, and it’s difficult to be profitable, but “when a title is successful it can be quite profitable, and these profits subsidise losses from unsuccessful titles”, and thus “Copyright, and the increased copyright term, affects the situation by increasing the profitability of the successful titles”. This is true, but unfortunately it only increases the current value of the successful titles by a few dollars, which is insignificant — the record industry could save that much by take the thousands they gave the Allen Consulting Group and investing it. Where there’s real money to be made is increasing the protection for existing works whose copyright term is due to expire soon: since the effect is in the near future, the present value calculations don’t trivialise the value.

This might, in fact, be a good thing. It might be useful for movie studios and publishers and record companies to get a bit more money they can spend on new bands, or better promotion, or fighting P2P, or whatever else. But what it isn’t is an incentive: the benefit comes solely as a result of ownership of existing copyright, and is not dependent on creating new works in future.

It’s reasonable to consider copyright term extension in two ways. As they apply to new works, there are possible added incentives for creation of works, which might be beneficial to society, and possible benefits to society by encouraging artists to be based in Australia, rather than various alternatives. The best economic argument available (and present value calculations are widely accepted in financial areas) indicates these issues are insignificant, and there is no evidence to contradict this argument. Which makes it seem pretty sound. As they apply to existing works, on the other hand, there are two sets of results. One is a windfall to existing owners. Which explains why they care, at least, and there’s not really anything wrong with that. There’s a corresponding loss to the public in general, although I’ve no idea how you’d go about calculating that. (Presumably it’s greater than the windfall to owners — if it weren’t the public domain would be a loss to society, which seems implausible — but how much?) And on the other hand, making stuff into property encourages someone to take some care over it, which is usually better than having no one take any care of it at all. A third issue is that of consistency in the copyright term of various works, but, really that’s of very little value, given all the existing inconsistencies anyway (between works whose authors live to different ages, amongst countries, between works who entered the public domain before copyright terms got extended, etc).

The other utterly bizarre claim the report makes is that term extension will reduce rent seeking costs. The claim is:

Rent-seeking costs may include the resources expended by individuals and groups to lobby government for favourable regulation and sepcification of the propery system. It is clear that significant resources have been expended by copyright owners globally in an effort to encourage legislators to extend existing copyright terms. Failure to extend the copyright term in Australia now will likely result in increased costs until it is extended to overseas levels. Thus, term extension would likely reduce future rent-seeking costs.

It’s dishonest on its face, since there will always be the exact same incentive to extend copyrights for works about to expire, and unless we remove the public domain entirely, various copyright owners will continue to lobby for extensions. The present value of an N-year extension for a work that’s earning X dollars per year whose copyright expires in M years, that was created O years ago, depends only on N, M and X, not on O — so if the extension is granted, and the work continues to earn X dollars per year the value of lobbying for extended terms will be exactly the same N years after the N-year extension is granted. So unless record companies are irrational, they’ll spend the exact same amount on lobbying government then, as now. You can even see this happening in the US now, as copyright owners lobby for further term extensions.

But it’s dishonest in another way too: frankly, no one but the copyright owners care about reduced rent seeking costs to copyright owners. Rent seeking is bad when the government gives in to it: by definition rent seeking is when groups try to persuade the government to give them a new income stream without them providing anything valuable in return. That imposes a cost on society (obviously), without giving any benefit to society, which obviously, sucks for society.

The best way to reduce rent seeking costs isn’t to cave more easily to the copyright industry (which will simply encourage them to spend the same amount or more on additional rent seeking) but rather to make it clear that such investments won’t have any return, and are thus wasted.

But in any event, reduced rent seeking costs as defined in the report are of no public interest whatsoever.