Public Goods

I was talking with a friend about "public goods" this evening. He tells me that economists call something a public good if (1) creating it doesn't interfere with creating more of it and (2) if anyone can use it, everyone can use it. So, for example, grain fails both these tests, as creating it genreally requires land, so that interferes with other people creating it, and if I use it, then you can't. Radio fails test (1) because there is only so much bandwidth, but passes test (2). If I broadcast so you can hear, so can anyone else nearby. You can imagine a world in which cars also passed test (2). If cars it were illegal to build a car with locks, and cars all started at the puch of a button, then for practical purposes if you could use the car, so could I. (Because it's not useful if you have to stay in it.) But in practice, it's easy to build locks into cars to exclude other people, and such an artificial law wouldn't survive, so cars fail this test. In general, if it is economical to exclude people, it will be done, so that profits can be made on the good.

An example of a public good is a lighthouse. Streetlights would be another example. (Although their utility is very local.)

In general, markets don't work well to promote public goods. It is too easy to be a freeloader. So public goods are generally provided by the government and supported by taxation, or sometimes by local philanthropists.

Hypothesis: Now that is is very cheap to record and copy music, music may become a public good. It used to be easy to "exclude" people, because to use a recording, you had to obtain a physical object (e.g., a record) and these physical objects are exclusive - only one person can use one at a time. That's not true any more. Once I create an MP3 file, anyone can use it, and we can all use it at the same time. (And obviously, my creating an MP3 file doesn't prevent anyone else from doing so.) The recording industry is trying to create a barrier to this, with various copyright protection schemes. And the law supports them. But it is cheap to copy files, and copyright protection schemes interfere with legitimate use, and are avoided by legitimate customers. The law against copying music may soon become as artificial and insupportable as a law against locks in cars.

What would be the implications of this??

Recorded music has only existed for a couple of centuries, yet musicians have existed throughout history. Musicians would probably survive, and continue to create new music. They would be supported the way musicians used to be - paid for live performances, supported by gifts from patrons, and supported by purchases of t-shirts and such from fans. The technology to "pass the hat" over the internet already exists (paypal) so patrons don't have to be wealthy. Major municipal orchestras already take in more than 5 times as much in gifts as they do in sales of recordings. The only big losers would be the recording industry.

Books and movies are two other products that seem poised to become public goods. This is unlikely to be a serious problem for books. Very few authors make money as it is, and if it becomes easy for authors to pass the hat, most will probably make more in patronage then they do now in royalties. Producing and distributing books is hugely expensive compared to creating the content. Movies are another story, however. "The Lord of the Rings" cost hundreds of millions of dollars to make. "The Blair Witch Project" cost a few tens of thousands. Even that is tens of thousands more than it costs to create a book or an album of recorded music. If copyrights go away, will we still have new movies?

Thoughts?

[E. Blackadder]

On 2002-01-12 23:54, Lucy wrote:

The only big losers would be the recording industry.

Just last night I was enjoying original compositions being performed by a friend. It would be a shame if she had no real chance earn a living by writing music.

she also wrote

Very few authors make money as it is...

That's because very few authors are worth reading. Even the Pulitzer-winning and National Book Award stuff is hit-or-miss. And as for the [shudder] Oprah stuff, the less said, the better.

[Branwell]

Authors have nothing to worry about. Although books could be scanned & electronically copied, the experience of readng a book on a computer screen simply isn't as pleasant as reading the actual book, so people will still buy books.

Come to think of it, it's already possible to read any book you want, in actual book form, in the comfort of your home, without paying for it, thanks to public libraries. Since that hasn't killed book sales, I don't think anything else will.

I don't know much about music, but I think musicians have more to worry about. The rich & famous ones do, that is. Poor & obscure ones don't have valuable recordng contracts as it is.

There's a limit to how much you can make by charging people to hear you in person. You can only fit so many people in the concert hall, there are expenses, etc. The big money is made by recording a CD once & selling it 100,000,000 times. If copyrights on music became unenforceable, future rock stars won't be able to replicate Madonna's economic success.

Come to think of it, it's already possible to read any book you want, in actual book form, in the comfort of your home, without paying for it, thanks to public libraries.

Come to think of it, it's already possible to read any book you want, in actual book form, in the comfort of your local bookstore. Just pull up one of those comfy chairs they usually provide, grab yourself a latte, and read for hours.

First, my question is not so much "is it right that this may happen?", but "it may be inevitable that this will happen, if so, what are the consequences?"

There's a limit to how much you can make by charging people to hear you in person. You can only fit so many people in the concert hall, there are expenses, etc. The big money is made by recording a CD once & selling it 100,000,000 times.

There's no limit to the number of noses you can shove your cup under, though, thanks to the internet. There is already a small but viable shareware industry, and they distribute stuff that appeals to a much smaller audience than music. True, Madonna might not make it that way - she exists due to the marketing strength of the recording industry. But I'm not sure she's exactly in the business of creating music. She may be closer to a movie economically.

[Branwell]

There's no limit to the number of noses you can shove your cup under, though, thanks to the internet. There is already a small but viable shareware industry, and they distribute stuff that appeals to a much smaller audience than music.

How viable is it? I haven't kept track, but some time ago, someone writing in a computer magazine opined that "shareware stinks," citing that in his case it appeared that only a trivial fraction (1%?) of the people who used the product he was talking about actually sent in the shareware fee.

Shoving your cup under people's noses often has a very low yield (particularly if they don't have to look at you as they refuse to contribute).

[Arlie_Proctor]

Lucy:

A public good is generally one for which the producer of the good has little or no chance to ever make a profit because it is difficult or impossible to control the consumption of the good by the general public. Hence, there is little incentive to produce the good unless it is paid for by public funds.

In the case of music, books, software, architectural blueprints, art, ......... there is a bit of a catch that does not apply to parks, streetlights, highways, and the like: copyright laws. While it is certainly possible to make copies of music, it is illegal to do so. Napster tried and failed to cross over this barrier of legality, ending the days of mass distribution of music over the internet. Similar cases have shut down several internet sites that used to distribute musical guitar scores for pop music.

That won't stop individuals from illegally sharing things by e-mail, that won't stop black markets from developing, but it will stop mass distribution over the internet.

For that reason, in addition to live performances mentioned above, I don't think music qualifies as a public good.

Arlie

[The Drunken Actuary]

On 2002-01-13 16:42, Arlie_Proctor wrote:
Napster tried and failed to cross over this barrier of legality, ending the days of mass distribution of music over the internet.

Napster may have been shut down (I never used it myself) but there are numerous sites to get all the free music you want. I've searched for many songs myself and always got a hit. I don't think the days of mass distribution of music over the internet are over; probably just beginning.

[Scotty]

In general I think that the producer of the good should have the last say on whether or not it is public. Some musicians may want to distribute their music (or operating systems) free, while others may not. And they "compete" with each other.

If you force a good to be public, there will be fewer goods.

There is one recent case that came close to making me rethink this. This was the anthrax vaccine, but our government struck a deal.

[Branwell]

In general I think that the producer of the good should have the last say on whether or not it is public.
. . .
If you force a good to be public, there will be fewer goods.

This is missing the point. No one said anything about forcing any goods to be public. The proposition under discussion is that technology might make it impossible to enforce the non-public status of music (regardless of what the artists or the law might want). If this is so, what are the effects likely to be?