In a World of Bullshit, This Is Some Egregious Bullshit

Via Scott McLemee and Corey Robin, I learn that Lawrence & Wishart, the publishers of the collected works of Marx and Engels, have issued takedown notice to the Marxist Internet Archive to remove all the material that L & W have copyright on.  Which apparently they're going to do -- on May Day, appropriately enough.

As Scott points out, its not clear that this assertion of its property rights is going to earn L & W any money:

Somehow it has not occurred to Lawrence & Wishart that, by enlarging the pool of people aware of and reading the Collected Works, the archive is actually expanding the audience (and potential market) for L & W’s books, including the somewhat pricey MECW volumes themselves, available only in hardback at $25-50 per volume. ... If Lawrence & Wishart still considers itself a socialist institution, its treatment of the Archive is uncomradely at best, and arguably much worse; while if the press is now purely a capitalist enterprise, its behavior is merely stupid.

The probability that copyright infringements can increase the income of copyright-holders has been mentioned on this blog before. If you take five minutes to think about who the market is for the collected work of Marx and Engels, it'll be clear that that the existence of the Marxist Internet Archive is probably not cutting into it.

But beyond the pure stupidity of this, there's the ideological stupidity.

I'm on an email list about teaching. The issue was raised recently, the list is a space for people to talk about what they do in the classroom, what works, what doesn't, to vent about what pisses them off. It won't work if stuff gets shared outside the list. Which, I totally agree! But what struck me, the request not to disseminate things people say on the list elsewhere, it wasn't phrased in terms of privacy or professional courtesy, it was about respecting people's intellectual property. That is how ideology happens.

L & W have put up response to being called out on this. We are, they say

not a capitalist organisation engaged in profit-seeking or capital accumulation, but a direct legatee of the Communist/Eurocommunist tradition in the UK, having been at one time the publishing house of the Communist Party of Great Britain. Today it survives on a shoestring, while continuing to develop and support new critical political work by publishing a wide range of books and journals. It makes no profits other than those required to pay a small wage to its very small and overworked staff, investing the vast majority of its returns in radical publishing projects...

In other words, it’s ok for us to use the power of the state to prevent people from reading Marx because we are Good Communists and we are going to do something awesome with whatever rents we can squeeze out of our copyrights. Raskolnikov had nothing on these guys.

Besides, they say, it's so unfaaaaaair to ask them not to steal every penny they can get their fingers on. If you were real radicals, you'd respect the sacred rights of Property.

In asking L&W to surrender copyrights in this particular edition of the works of Marx & Engels, the Marxist Internet Archives and their supporters are asking that L&W, one of the few remaining independent radical publishers in the UK, should commit institutional suicide. 

I guess there's some dramatic irony in seeing Marx's publishers engaged in this kind of primitive accumulation. But seriously, this is some egregious bullshit.

Cases like this bring out the black-is-white language of IP piracy. Here we have a group of people engaged in ongoing economic activity -- an ongoing sharing of knowledge -- and then an outsider arrives and tells them to stop what they're doing on threat of violence, unless they pay up. Wouldn't the pirates in this case be that outsiders? Wouldn't the pirates be the ones using the threat of violence to disrupt an ongoing sharing of  in order to appropriate a little booty? — which, as Scott points out, may not even be enough to defray the costs of their pillaging expedition.

L & W's statement amounts to: “it’s ok for us to use the power of the state to prevent people from reading Marx because we are Good Communists and we are going to do something awesome with whatever rents we can squeeze out of our copyrights.” Raskolnikov had nothing on these guys.

On Other Blogs, Other Wonders

1. Are Banks Necessary?

Ashwin at Macroeconomic Resilience had a very interesting post last month arguing that the fundamental function of banks -- maturity transformation -- is no longer required. Historically, the reason banks existed was to bridge the gap between ultimate lenders' desire for liquid, money-like assets and borrowers' need to fund long-lived capital goods with similarly long-term liabilities. Banks intermediate by borrowing short and lending long; in some sense, that's what defines them. But as Ashwin argues, today, on the one hand, we have pools of longer-term savings for which liquidity is not so important, at least in principle, in the form of insurance and pension funds, which are large enough to meet all of businesses' and households' financing needs; while on the other hand the continued desire for liquid assets can be met by lending directly to the government which -- as long as it controls its own currency -- can't be illiquid and so doesn't have to worry about maturity mismatch. It's a very smart argument; my only quibble is that Ashwin interprets it as an argument for allowing banks to fail, while it looks to me like an argument for not having them in the first place.

Another way of reaching the same conclusion, in line with recent posts here, is that you can avoid much of the need for maturity transformation, and the other costs of intermediation, including the rentiers' vig, if business investment is financed by the business's own saving.  In comments to the Macroeconomic Resilience post, Anders (I don't think the same Anders who comments here) points to some provocative comments by Izabella Kaminska in a Financial Times roundtable:

An FT view from the top conference, with Martin Wolf moderating. He said an interesting thing re. all the cash on the balance sheets of American corporates. That for many US corporates, banks have become completely redundant, they just don’t need them. ... The rise of the corporate treasury, investing wisely on its own behalf. Banks have failed at the one job they were supposed to do well, which was credit intermediation... No wonder banks have sought ever more exotic creative financing options .. their traditional business is dying. They’re not lending, can’t lend. So corporates are inadvertently acting by piling up cash reserves to solve that problem.... [You] see lots of examples of Corporates who don’t trust banks. … it’s amazing to think that we have come this far in the last two years… to a point where people like Larry Fink are suggesting banks are pointless.

This is part of the story of Japan's Lost Decade that Krugman doesn't talk about much, but that Richard Koo puts right at the heart of the story: By the mid 1980s, Japanese corporations could finance almost all of their investment needs internally, but the now-redundant banking system didn't shrink, but found a reason for continued existence in financing real estate speculation. Banks may be pointless, but that doesn't mean they'll go away on their own.

2. Are Copyrights Necessary?

I'm surprised there hasn't been more discussion in the blogosphere of this new working paper by Joel Waldfogel on copyright and new music production. (Summary here.) Has Yglesias even mentioned it? It's totally his thing: an empirical study of whether file-sharing has reduced the amount of good music being produced, where "good" is measured by radio airplay, and various critics' best-of lists. Which, whatever, but you've got to measure it somehow, right? And, oh yeah, the answer is No:

We find no evidence that changes since Napster have affected the quantity of new recorded music or artists coming to market. ... While many producers of recorded music have been made worse off by changes in technology, there is no evidence that the volume of high-quality music, or consumers, have suffered.

Information wants to be free.



3. It's an Honor Just to Be Nominated

Hey, look, someone at everyone's favorite site for d-bags with PhDs, econjobrumors.com, has started a thread on the worst economics blogs. And the first blog suggested is ... this one. "Krugnuts times 11," he says. I think that'll be the new tagline.

What Do Bosses Want?

The New York Times paywall is here. Felix Salmon has the details, and what looks like the definitive critique:

What does all this mean for the New York Times Company? I can’t see how it’s good. The paywall is certainly being set high enough that a lot of regular readers will not subscribe. These are readers who would normally link to the NYT from their blogs, who would tweet NYT articles, who would post those articles on Facebook, and so on. As a result, not only will traffic from these readers decline, but so will all their referral traffic, too. The NYT makes more than $300 million a year in digital ad revenue, so even a modest decline in pageviews, relative to what the site could have generated sans paywall, can mean many millions of dollars foregone. On top of that, the paywall itself cost somewhere over $40 million to develop.

Against all that, how much revenue will the paywall bring in?... extra revenues of $24 million per year.

$24 million is a minuscule amount for the New York Times company as a whole; it’s dwarfed not only by total revenues but even by those total digital advertising revenues of more than $300 million a year. ... So by my back-of-the-envelope math, the paywall won’t even cover its own development costs for a good two years, and beyond that will never generate enough money to really make a difference to NYTCo revenues. ... I just can’t see how this move makes any kind of financial sense for the NYT. The upside is limited; the downside is that it ceases to be the paper of record for the world. Who would take that bet?

(For the record, in the past couple weeks I devoted a few idle moments to considering just how much I would pay for digital access to the NYT, and decided that $15 a month was just about my upper limit. But in fact I won't pay it, since top news stories will continue to be free on the iPhone.)

What makes this bad decision so interesting is how many other companies seem to make the same kind of bad decisions. And in particular, how completely they overlook the value of the kind of free marketing and brand development that Salmon describes in the first paragraph.

For instance, here's an interesting new working paper by Yi Qian on the effect of counterfeit goods on clothing brands, which finds

heterogeneous effects of counterfeit entry on sales of authentic products of three quality tiers. In particular, counterfeits have both advertising effects for the brand and substitution effects for authentic products. The advertising effect dominates substitution effect for high-end authentic product sales, and the substitution effect outweighs advertising effect for low-end product sales.

In other words, when someone buys a rip-off pair of Manohlo Blahniks, they may be foregoing a purchase of an authentic pair. But maybe not. And either way, their visible endorsement of the brand increases its appeal to others in a way that the company would otherwise have to spend scarce advertising dollars to achieve. Not surprising, it's the high-end brands that benefit on net from counterfeiters, since purchasers of counterfeit goods are less likely to be able to afford the real thing and the brand identity is more valuable. This is consistent with other research I've seen suggesting that in some cases, the advertising effect outweighs the substitution effect even at the level of the individual consumer -- buying a counterfeit handbag (or illegally downloading a piece of music, or whatever) makes a person more likely to subsequently buy that item legally.

(Qian is also co-author of this fascinating survey of the economics of counterfeiting, which identifies a remarkably broad range of theoretical and empirical cases where laxer IP protections turn out to benefit sellers. For instance, there's evidence that academic journals were able to charge higher prices as a result of the widespread availability of photocopiers starting in the 1980s, because the greater value of journals to subscribers who were now able to make copies of articles outweighed the loss of sales to people who read the copies.)

Sellers of branded goods can't be unaware of this research, or at least of these general effects. Yet we see sellers of branded goods going to ridiculous lengths to strengthen IP proections, even sellers of high-end goods who are least likely to be harmed by infringement. In effect, these companies, like the New York Times, are going to great lengths to deprive themselves of free advertising. It's almost like they put a higher value on controlling their brand, than on profiting from it.

Which they probably do.

It makes one think about the Marxist literature on the labor process, and the idea that for capitalists, maximizing the surplus they extract from workers is secondary to maintaining the conditions under which surplus can be extracted at all. This is Stephen Marglin's argument in his classic article What Do Bosses Do? -- that the factory system was not initially adopted because it was any more technically efficient than alternative forms of worker-controlled production, but because of the strategic leverage it gave the owner of capital. He quotes a contemporary article in The Spectator observing that worker-managed cooperatives were competitive with capitalist enterprises:

Associations of workmmen could manage shops, mills and all forms of industry with success, and the immensely improved the conditions of the men, but then they did not leave a clear place for the masters. That was a defect...

Similarly, bloggers and social media may successfully generate immense traffic for the Times, and counterfeiters may successfully build the value of the brands they rip off; but the owners of these properties may not be (only) confused when they object, since this uncontrolled activity has a less of a clear place for the masters.

As Kalecki famously said,

"Discipline in the factories" and "political stability" are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound.

Profits come second to power. So when the results of productive labor aren't appropriated as private property, the class instinct of the bosses of the information industries must tell them this is unsound, even if it's more immediately profitable than the alternative. As Kalecki says in the same essay, "The fundamentals of capitalist ethics require that 'you shall earn your bread in sweat' -- unless you happen to have private means." That, I suspect, is fundamentally why the Sulzbergers et al. object to free ice cream, even when they can make more money by giving it away than by selling it.

Enemies of All Mankind

Is this for real? Did Bruce Sterling really write a novel in which the end of intellectual property rights leads to a complete collapse of social order, with bandits infesting the highways? Yes, it seems, he did.

OK. Take away whatever picture you've got in your mental dictionary under "hegemony," and put this there instead. Because what better ideological scaffolding could any form of privilege ask for, than the idea that society itself would fall apart without it.

Around 1600, most people could not imagine a world without an inborn hierarchy, without gradations of greater and lesser in every area of life. "There is a degree above degree. ... Take but degree away, untune that string, and hark what discord follows." Today they say, take but perpetual copyright away. Not much has changed.

Killer app

Anyone who pays for recorded music is a sucker.

But what about the artists? No one will make music if they don't get paid!

Possibly, this is not the case. But it is a problem that musicians get no money from downloads, perhaps not only because of the moral claims it gives to the parasites in the record industry. Here's the solution I'd like to see:

There should be a system allowing you to make a voluntary payment to the musician whenever you download a piece of music. Set the standard rate at, say, double the royalty the artist gets typically, and I'm sure the payment would still be much lower than what's charged for downloads now. What's stopping you from doing this yourself, you ask. The transaction costs are prohibitively high. You need to identify the musician's paypal account or whatever, decide the right amount (little decisions are very cognitively costly for some of us), and make an affirmative effort to make the payment. And of course, you need to have the idea of paying the musician in the first place – conventions do a lot of work, and there isn't one for this.

But imagine if there were some program that worked with iTunes, Rhapsody, etc. that whenever you added a track to your library, asked you, “Send a standard donation to the artist?” You could even set it to Yes by default. There'd also have to be a service musicians registered with, of course; I don't think that would be the hard part. And of course in our current IP dystopia you'd have to maintain the fiction that the donation was on top of what you'd already paid to buy the track “legally”. The payment would be voluntary, so you could pick the amount, but as the whole point here is to make the system as seamless as possible defaults would play a big role; personally I like the idea of a standard rate fixed in proportion to the median income of the downloader's country or region, but that's not important. The important point is that when you disintermediate the record companies, there is a very large space left where fees are much lower than current costs – low enough that many people would pay them – but high enough to provide a decent income to artists, even taking into account the inevitable freeloaders. And as for freeloaders, don't underrate the power of norms: People, after all, like the musicians they like, and it's easy to imagine donations under this system being quickly established as something you just do.

Of course, the donation only has a moral force that current payments don't because the money is going to the artist. If musicians find themselves signing contracts that pledge any donation income to their label, then we're right back where we started. Which brings me to a larger point.

Over at Crooked Timber, they're discussing the concept of “self-ownership”. Logically enough, they conclude that your personal autonomy can't be reduced to ownership, since you can't sell yourself. What they don't do is generalize this to a broader category of claims – let's call them moral rights – that can't be sold or otherwise transferred to someone else. There are obviously a lot of valuable but inalienable claims that fall into this category: degrees and other credentials, membership in a family, citizenship. And most importantly in this context, what the copyright pages of European books call the author's “moral rights” as creator of an original work.

This right is well established in academia: priority in publishing is felt very strongly – it is in some sense the currency of scholarship – and, more important, enforced with strong social sanctions. What's funny is it has no legal status. More broadly these kinds of rights clearly are legally recognized. For instance, it would be interesting to know what the case law is – there must be some – on the hypothecating of Social Security benefits. Clearly it is not the case that you can sell your future Social Security for a lump sump payment n the present, or there would be various well-established sleazy outfits doing that; but I'd very much like to know the arguments the courts accepted why not.

Point is, there clearly is a category of rights that cannot be alienated, and it's a category that could be usefully broadened, here in the Age of Information.