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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.

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