Man Without Qualities

Tuesday, June 28, 2005

Grokster II

Thomas W. Hazlett, a former chief economist at the FCC now a professor of law and economics at George Mason University and a senior fellow at the Manhattan Institute writes in the Wall Street Journal:

Monday was the Fourth of July for property rights in the high-tech economy. .... Grokster was the closer call. ... The Ninth Circuit Court of Appeals ruled that the [software] firms were not "contributory infringers" because they did not possess "knowledge of direct infringement." The Supreme Court saw this as a dodge, and overturned. The firms collected advertising revenues on the Internet traffic they generated; the eyeball count was overwhelmingly driven by the free sales of other peoples' property. While Grokster and StreamCast didn't copy material directly, there was "no evidence that either company made an effort to filter copyrighted material from users' downloads or otherwise impede the sharing of copyrighted files." ...

The bigger property-rights mark may well be left by Brand X. ... Brand X was about rules to impose sharing obligations on cable providers. ....

Marketplace evidence strongly rejects the hypothesis that broadband network sharing rules are pro-consumer, a conclusion bolstered by an interesting experiment. In February 2003, the Federal Communications Commission elected to substantially pare back the network-access obligations shouldered by phone companies. The terms on which independent Internet Service Providers could use telephone networks to provide DSL, were made much less favorable. Newspaper headlines announced that this would increase the price of broadband service and slow its deployment across the U.S.

The reverse occurred. With expanded property rights, and reduced regulatory overhang, phone carriers became much more ambitious in deploying and marketing broadband. DSL price cuts and build-out led to cable-modem price cuts and upward-spiking subscribership. DSL is now running even with cable-modem providers in terms of new subscribers, closing a huge market-share gap. Consumers, expressing their own choices in the marketplace, prefer the less regulated alternative.

Property rights provide incentives for creativity and investment in the information goods of the New Economy similar to those witnessed in economies past. Courts that understand the central importance of ownership to economic growth should be celebrated for doing their part for entrepreneurship and consumer welfare.

I agree.

It is interesting that so many of the blogosphere's critics of the Supreme Court's recent, dreadful Kelo decision don the garb of robust protectors of natural property rights, arguing that the rights of a landowner are entitled to great respect (which the Court did not grant). But I also think it is unsightly, to say the least, that when the issue is copyright and other forms of intellectual property, many of the same critics are suddenly blathering elaborate explanations of how intellectual property rights are all about "balancing incentives," a "balancing" in which the creator of the property at issue often becomes - shall we say - a rather small player in the great utilitarian calculus. Of course, there is quite of lot of natural law embedded in intellectual property rights, but those natural rights just don't seem to count for much to the GREAT CONCEPTUALISTS AND VISIONARIES of the blogosphere.

One could easily get the impression that for many of such (what seem to me to be pseudo-libertarian) critics of the Court, it is just nasty, nasty, nasty for governments to take private property for mere public (utilitarian) purposes even for fair compensation. But when it comes to those who facilitate outright thefts of private intellectual property, the whole question is just whether those property owners have to move over and make way for the Creative Commons! One can almost hear such critics gently explain themselves to the Old Believers and intellectual property owners:
Hey, bozo, get the hell out of the way! Can't you see that the future is arriving here? You don't want to abort the revolution, do you? You just don't get it! YOU'RE NOT AN ENEMY OF THE REVOLUTION, ARE YOU!!??
A little bit of Dr. Zhivago right here in Silicon Valley! But, hey, who's keeping track?

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