The copyright system is broken

The debates surrounding copyright and piracy generally bore me. Those engaged in the debates invariably analogize piracy and copyright infringement to either stealing or sharing, and then the debate goes nowhere from there.

That vacuousness aside, the copyright system does seem out of touch with the modern world, and it is hard to see how it could seriously be sustained into the future. To understand why, it is best to start with an explanation of what copyrights actually are. Because the copyright system has been around for so long, we have come to think that it is a natural feature of the marketplace. But, it is not.

As Dean Baker skillfully explains, copyrights are government-granted monopolies over creating copies of some media. Back in the day, this was not as difficult a thing to enforce. Creating copies of books for instance required a printing press. If someone was violating the copying monopoly of some content creator, finding the violator and dealing with them was easy to do.

However, computers have totally changed the game. The copying monopolies granted to content creators become nearly impossible to enforce when every person with a computer has the ability to break those monopolies at zero cost. Instead of realizing that this monopoly-granting scheme has fallen apart, those in the content-creating industries and the government have tried to ramp up enforcement penalties to absurd levels. Through laws like the Digital Millennium Copyright Act, the federal government has tried to simply beef up copyright instead of rethinking it altogether. This solution is not working: polls indicate that 70 percent of 18 to 29-year-olds have pirated music.

To contemplate fixing this system, it is necessary to contemplate why it was put into place at all. The basic problem copyright tries to solve is that media creation is completely uneconomical. Creating an original music file is expensive. Counting labor costs and equipment costs, music file creation can easily run into the tens of thousands of dollars. But very few people would ever pay tens of thousands of dollars for a single music file. Every recorded song would thus be a completely losing venture economically speaking.

So, if we want to make this uneconomical activity economical, government intervention is required (that’s arguable, but let’s assume). Since music file creation is uneconomical, the government permits those who create music files to have a monopoly over copying that file. In a competitive market, the price of providing a file-copying service would be $0.00. That is how much it costs to copy a file these days. But, by granting a monopoly over file-copying, the government allows the content creators to capture economic rents with their file-copying services. Because they can generate rents with their copying monopoly, producing the content to make copies becomes a profitable venture.

That solution is unworkable now because enforcing the copying monopoly will be basically impossible. So, the question then becomes: what other ways are there to make uneconomical things economical? We have examples we can look at to think about the question. For instance, almost the entire non-profit sector does work that is uneconomical. Despite this, non-profit workers are able to make money to live on due to government grants, private foundations, and donations.

Music creation could try a similar path. If the government wants to intervene to incentivize the creation of digital media, it could do so directly through grants (instead of indirectly through enforcing copying monopolies). If the state taxed every person $20/yr, it could distribute $6 billion dollars for digital artists through something like the National Endowment for the Arts. This would be equal to 100,000 artists making $60,000/yr. That is not as high as some big name artists make now, but they probably shouldn’t be making that much anyways. The only reason they presently make that much is because of the government-granted monopolies that permit them to capture outsized rents.

Digital art foundations could be set up to distribute funding to artists to make music files. Individuals could also donate directly to artists or foundations in order to support the creation of music files. In fact, the individual donation system could actually be combined with the government grant system to create a quasi-market for musical creation. The government could allow people a tax credit with some upper limit (say $50/yr) for money they donate to musical content creators. This would function the same as deductions people can make for donating to charity currently.

I am not saying all of these solutions would necessarily work, but some cocktail of them is at least worth trying. What the government is trying to do now — extend and strengthen the copyright system — is almost certain to fail. Some other set of funding ideas at least would have a chance at success.