Have we come to a point in time where our traditional, trade-off based, economic theories no longer hold ground? Society has generally accepted and largely based itself around these models. To deal with our limited wealth and our limited options we must make choices: we eat chicken instead of beef, we stop buying expensive restaurant dinner in order to go on holiday...All of our decisions implicitly force us to give up the alternative. The "opportunity cost".
The internet has presented a new situation. Information no longer has a price. Piracy has essentially destroyed the market structure of media. Software, music, newspapers, magazines, television, movies...Who pays for these? The wealth of new technology, particularly file-sharing platforms, has diminished the cost of production of the aforementioned goods. Computers programs and movies are spread around the world for basically no price at all. There is no opportunity cost! You are giving up nothing in order to consume these goods, they are free!
But, as the saying says, there is no such thing as a free lunch...On the other side of the stories stand the writers, the musicians, the actors and the enormous industries that support them. People that expect to eat and live off of what they produce. However, a huge portion of what they can potentially make is absorbed by the consumption-vacuum that is the internet.
Piracy is the most unbalanced and unfair economic system. It never reaches equilibrium. Ridiculously disproportionate terms of trade reign. Piracy can not and will not withstand the test of time as a valid economic structure.
How long will we be able to abuse the resources of the web as we do now?
I can't say when or how this free-for-all system will collapse.
All I can say is, download now while you still can!
If you have an apple and I have an apple and we exchange apples then you and I will still each have one apple. But if you have an idea and I have an idea and we exchange these ideas, then each of us will have two ideas.
—George Bernard Shaw
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I recently had this discussion with my father and what both of you get wrong is that you think that works of culture (books, movies, music etc.) work, economically, like normal commodities. On an industrial level, this is of course true, however, at the very base of why they are created, this is completely false. Normal commodities are created at the expense of someone in order to punt them off a for a little bit more than what they payed to make them. Works of culture on the other hand are generally made by people because, at the heart of it, it is something they love to do. I think that the corporate model for funding the arts have brought us such horrible things as the mainstream cinematic and music industries, which in turn have brought us, over the years, enough mind numbingly banal crap to make a one man band starring terry shivo sound exciting. What will happen because of piracy is that the market will shift to the ancient form of funding, namely the practice of fan-driven patronizing. The difference this time is that economic and communicational progress have allowed the evryman to take part in this, as opposed to the old days wher patronage was a domain of the aristocrats and the bourgeoise. The obvious example is of course Radiohead and their of rainbows album. Furthermore, i believe that if you are going to make your living painting, singing dancing etc., you either have to be absolutely prodigal, a complete genius or expect to live at the margins. I truly think that this time, the bush-hating anti war raving alternative teenagers got it right: piracy will help wean out the britney spears and jennifer lopezes of the world, and help the artists and bands who truly are talented. But the beauty of it is that it will make showbiz a much more democratic process: it will no longer be about knowing the right jews and homosexuals at the top of the ladder (sorry, weak joke i know, but i really couldnt resist), and be more about how many people you can enchant with your creations. That is my position, and i will stand by it.
ReplyDeleteYou make some good points, Karl Peder August. I especially like the idea of piracy eradicating the excessive profits that have been made from mass-producing musical acts for the MTV audience, and diverting attention to fewer truly talented acts. A situation where devoted fans will become willing, once again, to send money on them.
ReplyDeleteYou also mention that music today is largely about knowing the right people yet you propose that things will turn back to a patron-based system. I cannot think of a situation where "knowing the right people" is as important as it is in a patron based system. Moreover, the power of deciding what should be produced would lie in the hands of a very small group of individuals...
Finally, remember that piracy does not only rob cultural activities but also journalism and software...
First of all, I have to say I agree completely with your article, and have found out it to be of high quality and interest.
ReplyDeleteWhat stupefies me is that, amidst the crushing of whole industries by piracy, these do not respond "correctly".
Piracy is aberrant from an economist's point of view: as you so rightfully said, exchange terms (if you can even call them exchanges, more like thefts of intellectual property) are completely asymmetrical and thus cannot withstand the test of time. I think piracy is a means to an end and not an end in itself, i.e. consumers are willing to go through with exchanges (as the huge amounts of content illegally downloaded attest), however don't agree with the terms (i.e. the price) and thus "boycott" the producers.
Theoretically, rational suppliers of media should respond to a near extinction of their demand (consumers shifting towards piracy) by strongly lowering their prices and/or adding value to their products, or outright mutating them entirely. As I was saying earlier, I am stupefied to see how little the industries have evolved. These industries are still basically the same as they were in the past. Some might argue that no, they have evolved, and that distributing media via the internet is growing exponentially. However, I consider this a logical evolution of these industries, that accompanies the technological progress that society makes. Obtaining media for free has become very simple, getting media to consumers should be too, to maintain a healthy balance. Gripping to their historically huge margins, producers would rather sue consumers for copyright infringement (and have them be unhappy) than to change the way they produce, market and valuate their product.
The demand has mutated, but the supply is lagging behind and refuses to acknowledge a shift in the market conditions. The question is, are producers being too greedy, or are consumers demanding impossibly low prices? One thing's for sure, one side will have to give.