Blogger Book Club: Taking What They're Giving, 'Cause I'm Working For a Living

By Matthew Guerrieri

Marc's post yesterday made the not insignificant point that Lessig's argument is mostly focused on popular culture. I agree with Marc that "popular" is a bit of a fishy term--maybe it's better to say that Lessig is concerned with culture that seems to be important in relation to its popularity. That's another can of aesthetic worms, but it does hint at why the hardcore classical repertoire rates barely a passing mention, and why even someone like Andy Warhol doesn't get mentioned at all. In turn, that may be feeding into the other imbalance in the book, which is towards amateurs, as opposed to professionals. My initial sense was that Lessig was far more concerned with permissive space for amateur remixes than with economic space for professionals. And, I realized, that includes professional remixers as well as professional RO culture creators.

Lessig admits (p. 291) that some forms of creativity require a traditional copyright regime to be properly incentivized. What he doesn't consider, though, is how his proposed regulatory shift towards amateur RW culture might affect the ability of that copyright to economically function. If companies are trending towards hybrid-style leveraging of freely-created content, and we're altering the regulatory structure to encourage that, then I can't help thinking that professional creativity, both RO and RW and everything in between, becomes a less viable option for those who might be considering it. Lessig's licensing solution--electronically monitored royalty micropayments to RO creators--shifts the economic incentive for RO creation to a long-tail back end. His spotlight economic model--leveraging amateur RW culture--freezes out a market for professional remixers.

I don't think this is a zero-sum game. But Lessig drives right by where his argument should be going right around page 230, when he briefly discusses spillovers and externalities. A spillover, in economic terms, is that part of the economic value of an innovation that accrues to somebody besides the innovator. Lessig says, correctly, that spillovers create public value, and, less correctly, that we thus shouldn't worry so much about them. In fact, there's an entire branch of economics that is very interested in spillovers from innovation--New Growth Theory. (I've been delving more and more into New Growth Theory because it seems to match up with my own experience of how the market treats the arts: that is, with a certain amount of bewilderment. When one of New Growth Theory's leading lights, economist Paul Romer, says things like--

In the physical economy, with diminishing returns, there are perfect prices; in the knowledge economy, with its increasing returns, there are no perfect prices

--that rings true to me.)

New Growth Theory traces its ancestry all the way back to noted apocalyptarian Joseph Schumpeter, but really took off in the 1990s when some economists started getting their hands dirty with problems of technological innovation and human capital. The oft-cited jumping-off point was Romer's 1990 paper "Endogenous Technological Change" (JSTOR link) which contains much of the point of the new theory in its title: classical and neo-classical economics regards innovation as exogenous, an externality that affects the economy from the outside, but New Growth Theory says no, innovation has to be a variable within the equation. The implications are commonsensical but economically novel--economic growth has more to do with the creativity of human capital than with simple raw labor force, and spillovers are a bigger problem than previously thought, because excessive spillover can actually be a drag on the economy by discouraging the innovation that it needs to keep running.

That includes artistic innovation as well, which is why I think that Lessig's under-incentivizing of both RO and RW creativity is a bigger deal than it seems. While much of New Growth Theory is concerned with technological innovation, there's been some attention to non-technology IP and copyright as well: Romer himself took a look at music and file-sharing in a 2002 paper ( JSTOR link), in which he pointed to work done by Steven Shavell and Tanguy Van Ypersele (JSTOR link) that proposed a different sort of licensing scheme, an "optional reward" system: a creator/inventor could opt either for traditional copyright protection, or an up-front tax-funded reward payment (based on estimated future royalties), in return for which the creation would immediately go into the public domain. In fact, according to Shavell and Van Ypersele:

Our main conclusion is that the intellectual property rights system does not enjoy any fundamental advantage over the reward system. Indeed, an optional reward system--under which an innovator can choose between a reward and intellectual property rights--is superior to the intellectual property rights system in the model we examine. These findings derive from the primary virtues of reward systems: that incentives to innovate are provided without granting innovators monopoly power over price and that the magnitude of research incentives may be selected by the government.

If you applied this model to music (as Romer recommends) you can see how it would increase the upfront incentives for professional RO culture, while eliminating some disincentive for professional RW culture (with more innovation in the public domain, the burden of licensing samples decreases). It's not perfect--professional remixers still lag in upfront financial incentive--but it's better than Lessig's model, I think, and a sign that the economic possibilities are more varied, and, for professionals and would-be professionals, more interesting than they might seem.