|Man Without Qualities|
Friday, October 11, 2002
A prior post addressed the challenge to the copyright extension act - the so-called Bono Act - that has reached, and for which oral argument was recently heard by, the Supreme Court.
In my opinion, it is highly unlikely that the Court will invalidate this act, contrary to what is argued by the Volokhyries.
UNAVOIDABLE UNCERTAINTY IN DETERMINING INCENTIVES
Much of the force of the arguments against the Bono Act lies in the practical economic calculation of the value of the additional years that Act adds to the copyright monopoly. As summarized in my prior post:
[B]ecause of the time value of money, a dollar to be received more than 50 years in the future is just not worth that much as an author's incentive today. As one plaintiff put it: “We actually went to the trouble of getting an amicus brief from … a professor of economics at Berkeley, and he made the calculations and found that it would only be a few cents difference in royalties between 50 years after an author died, which is how the law has been since 1978, and 70 years after the author died.”
Fine. Except that to perform that calculation that "professor of economics at Berkeley" (or anyone - including the Court) must choose a discounting rate of interest good for twenty to seventy years. For example, the media is now full of warnings that the nation may face a protracted period of "deflation," a phenomenon normally associated with very low, even negative, interest rates. Interest rates are already quite low - and in Japan, which has been experiencing "deflation" for years has also experienced dramatically low interest rates for a long time.
Suppose the interest rate assumed for this calculation is zero (which might seem low, but then the Japanese experience shows that is a false commonplace assumption which depends on some pretty fancy economic prognostications). Then a dollar obtained from the copyright monopoly twenty, fifty or seventy years from now is worth exactly as much as a dollar today. Far from being "a few cents," the value of the extension - and therefore the power of its incentive - is HUGE.
In the alternative, suppose that interest rates will be stable and modest for 50 the next years - and then level out at zero for the next following twenty years (in the sense that borrowing money today for a period ending 50 to 70 years out costs no more than borrowing money today repayable in exactly 50 years). Then each dollar earned in the twenty-year extension period will be worth today exactly what a dollar in the 50th year will be worth. If it was constitutional for Congress to include that 50th year (under the 1976 Act), then how can it be unconstitutional to include the following twenty years under this assumption as to interest rate? Can the meaning of the text of the United States Constitution depend on an unknowable and essentially arbitrary assumption as to what interest rates will be in the period fifty to seventy years in the future? OF COURSE NOT.
The arguments now before the Court amount to insisting that it is of absolute Constitutional significance that actual, current interest rates do not have the characteristics described above. But the meaning of the Constitution is not determined by the current state of the bond market. The last major amendment to the copyright laws was passed in 1976 - a date followed by the Carter period of huge inflation and high interest rates (many home mortgages were made at 19%, for example). Does anyone doubt that the value of a dollar shrinks a lot faster at interest rates in Carter's 20% range than at Bush's (say) 3%? At the interest rates prevalent in the period 1976 through 1981, the discounted value of the copyright monopoly for its 30th through its 50th year was comparable to the value of the copyright monopoly at present, low interest rates for its 50th through its 70th year. Interest rates were very low in the depression, they are relatively low now and even lower in Japan - where they have been very low for a very long time. So what? The constitutionality of the copyright laws does not depend on whether interest rates go up or down.
And it also matters that the Copyright Clause was written in the late 18th century, when there was NO capital market in debt obligations worthy of the name in the entire United States. If, in 1800, Congress had wanted to know whether a particular copyright period was Constitutional under the now proposed "value of the marginal incentive" test, that could not have been done in any reliable fashion. Which is just as well, since at the time the Constitution was written the nation had recently experienced a period of hyper inflation (the saying "Not worth a Continental" refers to money, not soldiers). At hyper inflation interest rates of, say, 10,000%, the tail end of a 15 year copyright monopoly is not worth very much. The Framers understood debt and they had themselves recently experienced the various effects of interest rate fluctuations. In fact, much of the original Constitution is intended to protect the interests of the creditor class (the Contract Clause and the Bankruptcy Clause, for example). All of which strongly suggests that the Framers did not intend the meaning of the Copyright Clause to be determined in the way the Court is now being asked to do.
So what the heck would the Supreme Court be doing picking one or more interest rates for this analysis - any interest rate? Are the Justices expected to experience some kind of joint aphasia and start thinking that they were actually appointed to the Federal Reserve Board, the Council of Economic Advisors or the House Ways and Means Committee?
The problem with interest rate assumptions alone make it highly unlikely that the Court will invalidate the main provisions of the Bono Act based on any argument about the lack of value (and therefore lack of incentive effect) produced by adding an additional twenty years to the copyright monopoly.
But it gets worse.
SOME AUTHORS HOPE FOR HUGE RETURNS FAR IN THE FUTURE
Through the intermediation of the MicroSoft antitrust action, the world is now quite familiar with at least the existence of arguments which purport to explain how the copyright monopoly can be combined with strategic maneuvering to create a vast and growing dominance of entire industries (in the MicroSoft case, the software industry - allegedly, perhaps the entire internet). Whether or not MicroSoft's actions were illegal, the potential for holders of at least some copyrights to effect huge growth in revenues over rather long periods of time is very much a feature of those theories. Setting aside the antitrust considerations for the moment, what reasonable person could rule out a company such as MicroSoft basing its corporate strategy on a seventy year model for vast exploitation and extension of particularly valuable and basic copyrighted materials. Indeed, isn't that the kind of thing so much of the software industry is afraid of? Such huge returns, even fifty to seventy years out, might be substantial in today's dollars.
Further, does anyone seriously believe that the incentive effects on all forms of copyrighted material are going to be even roughly similar? The Church of Scientology copyrights its gnostic religious materials. Doesn't it seem reasonable that future L. Ron Hubbards (the founder of that Church) might very well consider the additional 20 years important if the point is to construct a Church that will grow to a huge importance over, say, 100 years - as Scientology now seems to be doing? Suppose one thought that one's new religion would expand gradually for fifty years after one's death and then really take off? Wouldn't that extra twenty years really make a difference? Doesn't the Vatican strategize in terms of centuries? To cite another quasi-religious example, consider how intensely the Freud Archivesstill struggles to control even access to his papers.
Similarly, Arnold Schoenberg used to say towards the end of his life: "In fifty years even the mailman will be whistling my tunes." Mahler expressed similar thoughts about how long it would take his music to come into its own. And Mahler's evaluation of his music's future was essentially correct (the prospect of hearing my mailman whistling at least later Schoenberg, I confess, is still unlikely). Mahler died in 1911. Much of his music had been performed during his life, but most of it was controversial and underappreciated. His work never completely fell from the repertory, but only really began to come into its own and be fully appreciated by the broad audience it deserved and he desired until the 1960's, fifty years after his death - especially in the United States, where it blossomed under the inspired championship of Leonard Bernstein. In short, Mahler seems to have lived and written music expressly for a future beginning a half-century after his death - and his hope came true. But the opponents of the Bono Act seem to deny that such expectations are meaningful to society.
We know at least some great music was created in specific contemplation of its performance in the time period captured by the Bono Act, although not with the expectation of financial return. How is the Supreme Court supposed to determine how much other art has been lost because the needs and thinking of such exceptional artists go far beyond what happens "the minute they completed their work" (as the New York Times charicatures the issue in its editorial discussed below)? Are the Justices going to pull out their Constitutional crystal balls, or think themselves from the comfort of their Washington chambers into the mind of the next Mahler who might or might not write a note without copyright protection for that very period of time he or she is thinking about? If they do, maybe the Justices could drop a footnote explaining how they did it to the rest of us.
Let's face it: Infinity is very large even after being discounted from seventy years in the future. And - as an additional complication - the infinities affected by the copyright laws are not only financial, as noted below.
In short, given the current state of economic and mathematical understanding of the copyright monopoly, the Court would be very foolish indeed to base any abrogation of the Bono Act on any argument which relies on an assumption or calculation of how important that marginal twenty years added by this Act to that monopoly might be.
Some of these arguments are articulated by this New York Times editorial. The Times waxes poetic in its own dry way with: "No one but a blockhead writes except for money, Samuel Johnson said, and those who subscribe to that view would be unlikely to write if, the minute they completed their work, others could copy it with impunity. But it is a highly reluctant artist — and one with extraordinary concern for his heirs — who will not create unless his work is protected for a full 70 years after his death." In addition to the economics above, somebody needs to explain to the Times that the Copyright Clause did not enact Mr. Samuel Johnson's social cynicism. And wisely, too, because copyright is as much about an author's or artist's ability to control the use of a copyrighted work as it is about money. Yes, the New York Times is in the business of extracting money from copyrighted materials - but that is not what every author and artist cares about the most. For many authors and artists - for example, most bloggers who write for free - the important thing is to be able to point to something others have read and understood and say, if only to themselves, I created that. Is it only a "highly reluctant artist" who might care about who controls his or her artistic output 50 to 70 years after death? I would have thought the higher class "artistic temperment" was prone to exactly that kind of thing. If one's aim is grandiose - say to remake the way society hears music and to establish a "new tonality," as was the case with Arnold Schoenberg - control of one's works in the period beginning a half-century after one's death matters. Indeed, Schoenberg famously wrote: "I have discovered something that will ensure the supremacy of German Music for the next hundred years." In short, that expanse of time seemed to matter to him.
In the sense of understanding the full purpose and structure of copyright, the Times could not be more wrong.
But it gets worse.
POORLY UNDERSTOOD BUT HIGHLY COMPLEX MATHEMATICS AND ECONOMICS
To the extent one might hope that the Court will seriously consider the additional incentive effect created by the twenty-year extension, the fact is that estimating the incentive effect is an economic calculation of absolutely huge complexity which is not well understood at this time - and the uncertainty of the correct interest rate is only a small part of that. For example, consider the relatively benign question of whether the Amazon used book site advances or impairs the economic interests of authors - a question which is simply a special case under special circumstances of how the incentive effects of the copyright monopoly are realized in practice. That is, the Amazon question is in a sense a small portion of the overall incentive question the Court is being asked to consider. As discussed in a prior post, the Amazon question alone unleashes almost inconceivably complex and subtle mathematical and economic considerations. Are the Justices boning up on their Nash equilibria skills? [If they are, they’d better not start by seeing that movie.]
The copyright laws, by their nature and legislative and constitutional intent, create limited market power where they create value for the author. That means that at least in the cases in which copyright is valuable - such as, say, Harry Potter books, the market intentionally created by Congress and specifically contemplated by the framers of the Constitution will be one of imperfect competition (yes, it appears to be true that Harry Potter has market powers). As Virginia Postrel has pointed out with her customary astute economic insight, the fancy game theory that is now being employed in academic circles to understand "imperfect competition" would be a rather unstable foundation for legal principles in its current state - still less as a guiding light in a Constitutional case overturning an act of Congress. As far as I can determine, none of that economics or mathematics has been included in the briefs to the Court - but if the Court wants to understand how an extension of the copyright monopoly might affect the thinking (that is, incentives) of authors such as a MicroSoft or a Mahler, the Court will have to figure all that out for themselves (I hope the committee is reserving nine Nobel Prizes) - or ask for additional briefing. Even if those heroic tasks could be accomplished, what happens to the Constitution next year if those academic economists and mathematicians, settling pillows by their heads, should say, "That is not what I meant at all, that is not it, at all."
Is the Court supposed to hold then that the Framers have changed their minds?
Of course, the Bono Act's critics have other arguments, not based - or not explicitly based - on any evaluation of the additional incentive value created by the marginal twenty years added by this Act to the copyright monopoly.
And all those other arguments that have been presented to date will also fail.
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