Tag Archives: cross-subsidy

Sharing or Stealing?

If I have an apple and you have an apple and we steal each other’s apples, we both end up with one. If I have an idea and you have an idea and we steal each other’s ideas, we both end up with two!

I’ve never understood why people don’t distinguish between stealing things and stealing ideas. It may be easy (and common) now to download music for free from various Napster-like peer-to-peer file-sharing sites, but that doesn’t make it legal.

We have laws to protect copyright, trademarks and other intellectual property (IP). To me, making copies is a victimless crime because nobody loses anything. The original product has no intrinsic value when it can be copied so cheaply and accurately.

Producers of music and other IP products obviously feel it’s ‘wrong’ for people to deprive them of revenues and profits by doing it, but it depends where you stand. Every problem is a fact plus a judgment, and you can’t prove a ‘should’.

You might as well say it’s ‘wrong’ for artists and authors to have a monopoly on their own works for 70 years after their deaths. Monopolies are illegal in most other industries, so why should copyright be any different? Should Amazon really be the only company allowed to offer ‘one-click’ purchase?!

Another objection is that repealing copyright legislation would remove any incentive to produce any new works of art or indeed think up any new idea, but, again, it depends on your point of view.

Are we not simply removing an unfair subsidy? And are we not restoring the original incentive to keep commercial secrets secret? That may be hard work, but that doesn’t give IP owners the right to complain. It shouldn’t be a moral problem but a technical one: how can I best distribute my product to make sure I get paid every time a copy of it is consumed?

Technology plays a large part in causing and solving all these problems. Copyright wasn’t an issue when scribes in monasteries took months to make a single copy of the Bible, but photocopiers and digital computing changed the rules of the game.

Equally, the BBC and other free-to-air broadcasters were given their monopolies when it was impossible to restrict access to the airwaves, but Sky and other satellite providers showed that such a justification is long past its sell-by date.

How can the BBC justify getting billions in guaranteed income from the licence fee when viewers could simply be forced to subscribe to the channels they want?

The basic choice is between cross-subsidies and free-riders. Either people pay for something they don’t use or they use something they don’t pay for. Neither sounds very appealing – although I prefer free-riders! – but there isn’t any alternative when goods are non-rivalrous (ie can be freely copied) and non-excludable (ie freely available to all).

These are known as ‘public goods’. ‘Common goods’ like fisheries (non-excludable but not non-rival) and ‘club goods’ such as cinemas (non-rival but not non-excludable) throw up similar problems.

Arguments based on values can never be won (or lost), but what this all boils down to is individualism versus collectivism. It may be true that public goods are ‘under-supplied’ unless the regulator steps in, but relative to what, exactly?

If it is the maximum level of economic activity (or ‘consumer surplus’) across the whole country, then the individual surely has the right to complain. Any Benthamite government taking decisions for the greatest good of the greatest possible number has effectively decided that the end justifies the means.

Whether it’s the licence fee or compulsory purchase orders, a binary moral decision – is it right or wrong? – has been turned into an amoral economic or political sum – what’s the effect on GDP, and how many votes are in it?

Where do we draw the line, though? Is one little murder justified if it’s a nasty man whom nobody liked? It may be true that killing is justified in certain circumstances (the ‘just war’, for example), but ethical guidelines have to be based on universally applicable rules to decide the outcome of any given conflict between individuals.

As the Gipper always said, the nine most terrifying words in the English language are: “I’m from the Government, and I’m here to help…”

Freakish Economics

A few months ago, I received a letter demanding £6,000. If I didn’t pay it by the end of January, the amount would start to go up. If I still didn’t pay it, I’d have all my possessions taken from me.

If that still didn’t cover it, I’d be taken by force and locked up without ransom in an unknown location for months or even years. If I ran, I’d be followed. If I resisted, I’d be shot.

The whole experience was obviously incredibly traumatic, and I had no choice but to comply. The letter, of course, was my annual tax demand…

Only freaks see taxation as extortion or the police as kidnappers, but the only difference is that this is a crime our elected representatives have actually voted for! As one of those freaks myself – we like to be called ‘libertarians’… – I’m used to people disagreeing with me, but I’ve long since given up believing I’m right.

I accept that economic arguments are almost always about values and not methods. Who am I to say that something is ‘right’ or ‘wrong’? You can’t prove a ‘should’. Like everyone else, all I have is a strategy for survival and reproduction.

Just because my genes (and an early trip to America when I was ten) have programmed me to believe in individual freedom doesn’t mean I should become Chancellor of the Exchequer or Governor of the Bank of England. I just have a problem with authority!

John Rawls tried to finesse the values issue in A Theory of Justice by asking what kind of society each of us would like to be born into. The more equal the society, the less the risk of poverty and ill health, but the more unequal the society the greater the chance of ending up lord of the manor.

It’s a brave attempt to define ‘fairness’ from first principles, but everyone from Socrates to Kant has had a different opinion. Even the Judaeo-Christian ‘golden rule’ is no more than a simple version of ‘tit-for-tat’: “I’ll trust you until you betray me, then I won’t trust you again until you’ve proved to me that you’ve changed.”

This strategy (or a modified version of it) is the dominant strategy when pitted against less philanthropic – and even downright criminal – versions in computer simulations carried out by sociobiologists, but it still won’t drive out all the rest. The point of the exercise is to show that all of them can happily co-exist, even when the majority of ‘law-abiding’ citizens tries to lock up all the ‘criminals’.

People can’t easily or consciously change their strategies (even if there is such a thing as ‘free will’), and the idea that something is ‘not fair’ is a familiar rallying call, even if ‘fairness’ collapses into what sounds more like tribal loyalty.

In an exit poll for a recent British election, the main reason Labour supporters gave for not voting Conservative was that it was ‘the party of the rich’, but, in the words of Mandy (Rice-Davies, not Lord Rumba of Rio), they would say that, wouldn’t they?

Given a choice of voting for wealth creation or redistribution, the have-nots will always choose the latter as they have more to gain. It’s an unwritten law of economics that the many will always be poorer than the few. It’s an unwritten law of democracy that the few will always get screwed by the many!

Take the BBC licence fee as an example. When it was first introduced, the justification was that it wouldn’t be ‘fair’ for people to tune in to the BBC without paying something for the privilege, and the technology didn’t exist to prevent them.

The unfortunate side-effect, though, is that anybody who doesn’t watch (or listen to) the BBC still has to pay for it. How can that be fair?! Well, in the game of high-stakes poker we call economics, a cross-subsidy always beats a free rider. Now that’s freakish…