Standard economic models show that tariffs cost jobs. The reason is that they make consumers pay more money for the protected product. This pulls money away that could be spent in other areas. If the spending took place elsewhere, it would create more jobs than the additional money earned by the protected industry.
The same logic applies to increasingly stringent protections for copyright, except the economic waste and resulting job loss is likely to be much larger. Tariffs rarely raise the price of products by more than 15-20 percent. Copyright can make items very costly that could otherwise be available for free or nearly free. This implies a tariff of several thousand percent or higher.
In addition, there are enormous costs associated with copyright enforcement, with both the public and private sector required to make substantial expenditures to prevent unauthorized copies of copyrighted material from being circulated. This amounts to a waste of resources that could instead go to productive activity.
Copyright and its enforcement can be thought of as being analogous to toll booths, which can be used as a way to finance road construction. If the only way we have to finance road construction is toll booths, then we absolutely need toll booths to pay the road-builders.
However, once we have roads that are financed through other mechanisms (e.g. government funding), then it becomes increasingly difficult to collect money at the tollbooths since people will opt to use the free roads. We could go the route that many in Congress want to take with the Stop Online Piracy Act (SOPA), which effectively amounts to building toll booths that are harder to get around and imposing tough penalties on those who try to take free roads.
This gets more money for the people who build and operate toll booths, but may not do very much to help the people who build roads. Alternatively, we could try to find ways to get more money directly to the road-builders without spending vast sums erecting bigger more expensive toll booths and being more punitive to those who use free roads.
Sunday, December 18, 2011
The Case Against Copyright
Here is a brief summary of why SOPA and similar copyright laws are bad for people and bad for the economy. This is a bit from a post by Dean Baker on his Beat the Press blog: