Pareto efficiency and copyrights.
The problem with copyrights is that they prevent copyrighted material from being priced at marginal cost, so called Pareto efficiency. One of my pet issues. I quote the description of the problem and solution from my book,
Exact Morality for Today :
"Another problem that our economy has concerns items practically all of whose cost of production lies in the first item. Nowadays, there are an increasingly large number of items (as measured by their value) in this category. It may, for instance, cost Microsoft many millions of dollars to produce a new computer program. But clearly, once the program has been made, it is trivial for Microsoft (or anybody else) to produce a great many copies of the program, all of which are of the same high quality as the first unit of software. The same applies to copies of movies—it is very expensive to make a movie, not very expensive to make a copy of one, say by VCR. Similarly, it costs society no more for an individual to be able to receive a pay-cable channel than to not be able to receive it (provided the cable is already hooked-up). Even with items that do have a substantial cost of production, as with automobiles, medicine, electronic and computer equipment, and books, still a great deal of the cost goes in the development of the item, and as a result the first item produced is going to be much more costly to produce than the later items. Now, idealistically, an item should in some sense be produced precisely when people are willing to pay for it more than what it costs society to produce another of the item. Accordingly, the price of the item should be what it costs society to produce another of the item (the marginal cost of the item, to use economic lingo). But there is no way in a standard capitalist economy that items which have enormous initial cost but little or no marginal cost are going to be able to be priced at marginal cost for the simple reason that any company that developed and produced such items would lose a great deal of money if it sold them at the very low marginal cost of producing the item. Accordingly, the government gives copyrights, patents, etc,. to restrict competition so that it can be profitable for a company to produce such items. This is such a fact of life that people lose sight of how much better it would be if everything could be priced at marginal cost. For instance, anyone who has a computer could have essentially free access to any software in existence, and anyone with a cable could see all popular movies for practically nothing, and could buy copies for practically nothing of all the others. And all the complicated electronic equipment that helps make modern life interesting, although it would not be free, yet surely its price would be negligible in comparison to what one currently encounters.
The simplest approach allowing the pricing of items with low marginal cost at that cost is to involve the government more in the production of such items. If the government produced such items, they could very easily sell them at marginal cost without going broke, merely because they have the power to levy taxes. This, of course, is socialism, which unfortunately in this country people tend to be prejudiced against because for so many years our chief competitor (the USSR) was socialist, and the powers in this country that make money by overpricing have naturally done all they can to nurture an anti-Communist hysteria that identifies socialism with evil. The Soviet government indeed was less than desirable; however, I would argue that such undesirability stems not from its having been socialist, but rather from its having been undemocratic and totalitarian. What a great many people in this country don’t seem to get is that although the government here may have its problems (as in the tendency of big money to control elections), the government is still elected by the people. Corporations, on the other hand, are controlled by a handful of rich people. Accordingly, it stands to reason that in this country, policies that give power to the government as opposed to corporations are likely to increase the freedom of society and its accountability to the wishes of the people as opposed to the wishes of a privileged few.
Another approach that would give similar results, and which might be more palatable to business interests (and hence more of a possibility), is to subsidize businesses. Government could simply give subsidies to those corporations who price their production at below marginal cost. The difficulty as is of this method is that it gives businesses very strong incentives to engage in a good deal of nefarious activity in the attempt to influence politicians. And the bribery, intimidation, and misinformation that corporations will engage in to get funds will likely be very difficult to stop inasmuch as corporations are not accountable to the voter, but only to the courts, who of course require a much higher standard of proof before meting out punishment. There is, however, a way of ensuring that subsidies reflect the wishes of the people as a whole which would make direct government subsidy of business very workable. The key, I think, is to let people vote directly on how much money should go to which corporations. In the computer age, such complex voting is now very workable. Now, without care in designing the voting system, there would be the problem that people would vote in their self-interest; for instance, they would set up dummy corporations of which they alone are the owners and would naturally vote that these self-owned corporations should receive all the subsidy. This difficulty could quite easily be resolved, however, by the trick of punishing monetarily those voters whose subsidy distribution is weird. At first sight, this approach seems obnoxious in that it would seem to punish weirdness (which tends to be better than conformity). Actually, though, although voting weird would punish oneself, yet it would also reward those who vote similarly, which an unselfish person would naturally be glad of. A selfish person, on the other hand, would try his utmost to be as conformist as possible in voting (since doing so is to his monetary advantage). Accordingly, selfish people would have practically no say in how government subsidies are distributed, while the unselfish would have very much say—certainly a very desirable property! Another difficulty that might at first sight arise is that the large number of corporations would make voting on subsidies impractical. Clearly, however, what would happen is that several (a few hundred?) organizations would make lists that reflect their opinions of how subsidies should be given, and people would choose their favorite list (perhaps making a few modifications). At any rate, the system is in one sense more reasonable than that of voting for people: by averages being taken, every person’s wish is taken into account. This is impossible in ordinary elections; it is not possible for (say) one-third of one candidate to be elected, one-fourth of another, and five-twelfths of a third. Unlike a sum of cash, an elected official can’t be chopped in pieces without reducing his effectiveness. As long as purse strings are controlled directly by the people, I don’t think direct government subsidy of business differs much from socialism in its worthiness. Probably even in socialism there should be some method of voting by the people on how industries should be subsidized (which would of course encourage industries to set their prices reasonably). Perhaps the most reasonable approach is to let people vote on how much money should go to businesses and the activities of government simultaneously; i.e., let the people decide the extent to which they want socialism or direct subsidy of business. Indeed, likely a mixed approach is best.* I shouldn’t be surprised if the founding fathers actually created the legislative branch because of a sense they had that the people should have a more direct control over spending than a purely executive system would give. A voting system actually giving direct control is what the founding fathers would probably have most wanted had it been technically possible then, so I just really don’t feel I am being un-American proposing principles some might reject as socialist."
Footnote *: For the interested, what I suggest is that when an industry is a good bit more efficient as a monopoly, the government should own the monopoly. It is silly, for instance, for there to be more than one railroad between two towns when traffic doesn’t support it, and it is silly to have several electric, data, telephone, or cable TV lines coming into a typical house; thus, railroads and utilities should probably be monopolies. And monopolies should typically be government controlled. Thus, for instance, if your utility company or local railroad becomes incompetently controlled, the people have more than weak government regulation (generally necessary in monopoly situations to preclude underproduction for the sake of driving prices up) to rectify the situation. The government unlike a board of directors can be booted out by ordinary people in elections. E.g., it was pointless that people had to put up with Penn Central and its predecessors mismanaging railroads for decades before Penn Central went bankrupt. Once the government stepped in, making Penn Central Conrail, it quickly became efficient and started being quite useful again (as well as making money). Likewise, PG&E has been obnoxious long before Erin Brockovich, and it would have been better if they had gone bankrupt long ago, and I’m sure that if their idiotic faith in their own lies as to the benefits of decreased regulation of electricity production finally leads them to become bankrupt, that will be the best thing that could happen. (My paternal grandparents were involved in the politics of electricity manufacture and distribution in California way back in the thirties, and the campaign PG&E waged against them was apparently so obnoxious that my grandmother even in her last years viewed PG&E as evil and felt obliged to remind people of it frequently as though that is one of the great lessons to be learned in life.) On the other hand, if spreading production in an industry among several manufacturers doesn’t lead to much inefficiency, it seems to me that having most production spread out among various private firms is preferable to having everything controlled by the government. After all, the president only gets elected every four years and is frequently not exactly the wisest American nor the most solicitous to ferret out the mistakes his agencies make. Moreover, there is (as is desirable, actually) a certain amount of inertia that keeps civil servants from being replaced very frequently. Government agencies are like corporations in that they can be good or bad and are not easy to change. Thus, when competition is harmless, production among many mostly privately operated firms is generally desirable as leading naturally via competition to increased efficiency even when the government is not very good or effectively self-regulating. For instance, it would be silly for clothing manufacture or hair cutting to be nationalized.
Since writing my book, it has occurred to me that an alternative to punishing monetarilly those whose subsidy votes are nonstandard is making their vote count less.
