Subject: Re: How FSBs and liberal economists can be allies [was: universities struggling to avoid making money]
From: "Benjamin J. Tilly " <ben_tilly@operamail.com>
Date: Tue, 27 Aug 2002 19:57:55 +0500

"Stephen J. Turnbull" <stephen@xemacs.org> wrote:
> Followups to fsb@crynwr.com (sorry, shoulda done this already; if
> appropriate for the other channels, feel free to speak up).
>
> Let's try to cut this back to what's relevant to FSB.  For those who
> think it's too damn long, anyway, an Executive Summary:
>
> (1) Friedman & Co. are _liberals_ first, economists second, and
> therefore our natural allies.  We need to show them how freedom _as
> they understand it_ is harmed by excessively strong IP.

The word "liberal" is used in so many ways at so many times by so many
people that I no longer know what any particular person means by it.

> (2) The most plausible argument _for this purpose_, which also happens
> to be that closest to the needs of FSBs, is that strong IP increases
> the power of "blocking innovations".

Indeed I would be curious about what Friedman & Co have to say on the
subject of patents.  Even if one does think that patents are
justifiable, the current system is so seriously broken that a major
concern has become "blocking NON-innovations". :-(

> Such blocking innovations can "suck up" all the "surrounding freedom",
> thus limiting consumer choice (and of course, vitiating developers'
> freedom).  Although unproved, this possibility is too dangerous for
> experiments with stronger IP to be justified at present, especially in
> light of historically new technologies like software itself, which
> argue for _weakening_ IP.

You speak as someone too familiar with software development.

Software holds out promises for both strengthening and weakening IP.
It has increased both the ability of people to copy (and hence the
extent to which intellectual property infringes on what people do) and
the promise of pervasive enforcement measures that people can imagine
would be virtually unseen.

It is an obvious conclusion to the experienced that the latter promise
cannot be fulfilled, and attempting to do so will cause a myriad of
problems that come back to haunt us again and again.  However that is a
conclusion whose reasoning is difficult to explain to those who have not
had to pay close and long attention to the effects of unintended
consequences of technical decisions.

> >>>>> "Ben" == Benjamin J Tilly <" <ben_tilly@operamail.com>> writes:
>
>     Ben> "Stephen J. Turnbull" <stephen@xemacs.org> wrote:
[...]
>     Ben> Friedman & Co are advocates of strong property rights and are
>     Ben> against the extension of existing property rights _for the
>     Ben> same reason_.
>
> Correct.
>
>     Ben> They want people to benefit economically for generating
>     Ben> useful economic activity.
>
> This is true, but it is not why they support strong IP and oppose
> copyright extension.  Friedman and Co. are 100% in agreement with
> Richard Stallman on this point!  _Freedom_ is what it is _all_ about.
> That's why they call themselves "liberals."  The economic benefit to
> individuals and to society is a happy accident, which derives from the
> basic rationality of the human being, under conditions of freedom.

"Freedom" means more things to more people than "liberal" does. :-)

As for the tying together of social goals and economics, there is
nothing quite so blind as an idealist who thinks he has a theoretical
justification for why people will act in accord with his ideals.  The
blindness is particularly acute when the theory is a reasonably good
(although not perfect - no theory is) match to reality.  In that case
the theory becomes a fixation that blocks sight of the fact that a
particular goal of interest is best reached by another path.  (Hammers
and nails come to mind here.)

You sometimes guarantee freedom best by simply saying that each person
owns the right to exercise that freedom, rather than by trying to cut it
up into many ownerships and then convince people to sell it to the right
persons at the right time...

> Extension of existing copyright is bad in Friedman's view because it
> is (purely) a public taking.  All public takings, as such, reduce
> freedom by concentrating resources in the hands of a capricious
> authority.  IP, like other property, is good because it places
> resources in private hands, and defines the rules which make free
> contracting (foresighted exercise of freedom in society) economically
> possible.  Furthermore, when vested in the developer, there is no
> public taking; the public has no access until the developer publishes,
> which she is free to _not_ do.
>
> That's what he says in _Free To Choose_ and _Capitalism and Freedom_,
> anyway.

This is also the the thesis of the brief that he signed for Eldred v.
Ashcroft.

>     Ben> Many copyright holders are for copyright extension and strong
>     Ben> IP again for one reason.  They view the creation of
>     Ben> intellectual property as an act of creation as real as any
>     Ben> creation of physical objects or the development of property.
>
> Granted.  I didn't mention that argument myself because if there is a
> natural right to intellectual property, the game is over.  Free
> Software is dead (although the kind of Open Source Richard Stallman
> loves to deride remains viable).  Nor do we have any common ground
> with those who espouse that view.

Not so fast!

First of all if there is a natural right to intellectual property, then
people have the right to dispose of their property in ways that reflect
whatever goals and desires that they have.  This includes the ability to
dispose of it in a way that supports Free Software if you can find a way
to do that.  Which is exactly what Stallman tried to do with the GPL.
Of course he supports only his notion of freedom.  We get into trouble
when his notion of freedom does not agree with other people's.  After
all when everyone attempts to exercise the freedoms that they think
that they should have, soon there are complaints about punched noses and
attempts to limit the freedom to extend fists...

Secondly what I consider important are people who do not know what
belief to hold.  There are reasonable arguments for treating IP as
property, and someone who has just been exposed to them is unlikely to
react well to your casually dismissing them.  Instead you should point
out that there are reasonable arguments for not treating IP as property,
and once both points are established you can explain how those needs are
supposed to be balanced.

The problem is that the status quo is a compromise between two extremes.
Today the debate is between people who think that there should be a
compromise and those who are at one end.  The end that is against IP is
still present of course, but tends to be utterly incoherent.  The result
is that it seems reasonable to outsiders to compromise between the
middle and the extreme, which is lopsided to say the least.

As http://press-pubs.uchicago.edu/founders/documents/a1_8_8s12.html
shows, the other extreme has had competent representation in the past.
But I cannot think of anyone today who holds that role.  (Probably
because the debate is so well formulated that people who are inclined
that way follow in Jefferson's footsteps to the conclusion that a
compromise between opposing needs is best.)

>     >> Granted, there really isn't a middle ground for FSB and
>     >> Friedman that I can see [...].
>
>     Ben> The identification of a middle ground requires first figuring
>     Ben> out why each side holds the positions that they do
>
> Which FSers have signally failed to do.  (The burden is on the FS side
> for historical and pragmatic reasons.)  The liberal economists, as I
> wrote, are strongly on the side of freedom for its own sake.  We do
> not make common cause with them, however; instead, some of us berate
> them as agents of the devil for supporting freedom of contract, which
> implies the freedom to sell your free software rights.

I know of no group that usually succeeds in figuring out what others
care about, and darned few of them who figure out what they themselves
care about.  In fact a group as diverse as FSBers doesn't actually have
a common ground.  Rather the acceptance of free software is itself a
middle ground between people of different views.

> In fact, to me this is precisely why Russ Nelson inter alia is
> justified in insisting that Open Source is as much about freedom as
> Free Software is.  Why shouldn't developers and users be free to
> choose closed software or open source software as they (jointly)
> perceive the tradeoffs between the forms vary?

Because Richard Stallman feels that his nose has been punched.  Though
perhaps that is his fault for sticking it into the printer. :-)

> Now, since at the time of innovation, the technology of the innovation
> is privately held (ie, a secret), such contracting (bargaining over
> license terms) is theoretically possible.  And this would allow the
> balancing of consumer (including follow-on developers) and developer
> interests.  However, the information, transaction, and enforcement
> costs would be overwhelming (especially for second-order developers,
> viz, FSBs).  Thus, the liberal interpretation of IP (strong or
> otherwise) is as a way to shortcut the transaction costs of
> contracting.  It's not an issue of proper reward; it's one of
> facilitating trade.  (Why do all the rights initially vest in the
> developer?  "Possession is nine-tenths of the law."  Initially the
> developer possesses the idea.)

Here is what I cannot get out of my head.  10 man-hours per document in
practice just to IDENTIFY who owns the copyright so that you can try to
enter into a transaction.

Some shortcut...

> Then the danger of strong IP is not strong IP for each idea.  Instead,
> it is the fact that since ideas are used in combination, the more free
> software there is, the more valuable the remaining proprietary ideas
> become (to the extent that they are "blocking innovations", ie,
> necessary to some important product).  This (theoretically) means that
> a few blocking innovations could cause efficiency losses, and
> implicitly losses of consumer freedom to choose, far out of proportion
> to their "standalone" importance (eg, probability of independent
> invention).

This is an argument against patents, not copyright.  Patents have
exactly this effect.  But re-inventing a way to do something that you
have seen work is far easier than figuring out how it could work in the
first place.  Therefore when only copyright is on the table, all
innovations are enabling.

> Theoretical though that argument is, I think it's strong justification
> for treating strong IP warily indeed.  We just don't know enough, and
> we could do serious long-term damage by excessive grants.

I wish the patent office took that view...

[...]
>     Ben> While it is easy to dismiss Congress and the RIAA as "pork
>     Ben> barrellers", flipping the "bozo switch" there prevents you
>     Ben> from hearing or being able to address the arguments that
>     Ben> influencing people towards strong IP.
>
> I'm not dismissing _them_.  I'm dismissing the possibility that we
> will be able to change their minds, the vast majority of them.  The
> combination of strong self-interest and a plausible moral principle is
> extremely difficult to overcome.  The only universally successful
> strategy is to outlive the holders of such "incorrect" thought.  :-)

It seems that you are also precluding yourself from convincing the
people who might be convinced by their arguments, but who could be
convinced otherwise as well.

> My wisecrack aside, how do you propose to "address" the moral argument
> for perpetual IP?  if it cannot be conclusively refuted, how do you
> propose to flush out the pork barrellers from among the genuinely moral?

By pointing out the moral argument against binding each person with a
thousand chains in perpetuity.  Most people are able to understand that
there may be competing valid concerns.  Once that is accepted, the
desire to forge a more thoughtful compromise becomes understandable.

>     Ben> The fact is that the arguments for strong IP and long
>     Ben> copyright terms that you hear today [...] fall into an
>     Ben> intellectual tradition that goes right back [...].  While you
>     Ben> might not _agree_ with them,
>
> But I _do_ agree with those arguments, in a Panglossian world.  Just
> as I agree with Richard Stallman's, in that world.  The problem is
> that both can't be right, although neither can possibly be wrong, in
> the world that I actually live in.

Why can't both be right?  Each has laid out an argument saying that
there is a legitimate interest in having things be this way.  Both
arguments can be correct - the legitimate interest exists.

We therefore must find a way to balance those concerns.  Many tools
exist for that, and many fields (including economics, the law, and
politics) address themselves to little else than the question of how to
balance competing interests.

> So I propose, with Friedman, that we allow them to contract their way
> out of their dilemma.  That is the only solution compatible with
> freedom.

And indeed, that is the standard economic answer to how to balance
concerns.  But that doesn't work when it takes 10 man-hours _just_ to
figure out who the right person is to try to negotiate a contract with!
For those who do not know, this figure is from the brief from 15 library
that you can find at
http://eon.law.harvard.edu/openlaw/eldredvashcroft/legal.html.  The
link does not appear to work at the moment, but that figure was their
experience in tracking down the owners of historical documents from the
20's and 30's that they wished to digitize and put online.

The figure of 10 man-hours is actually an optimistic estimate since they
only engaged in the search when they had prior reason to believe that it
would be relatively easy to find the owner.

> Footnotes:
> [1]  FSB is historically unprecedented because software makes it
> possible for uncoordinated individuals to have big economic effects.
> But this is not recognized by either economists, lawyers, or political
> scientists to date.

I find that there are more historical precedents than you are admitting.
After all free markets allow uncoordinated individuals to have big
economic effects!  An even better area (imho) to look for precedents is
the economics of networks (eg mail, telegraphs, telephones...), another
area where there are huge economic effects from seemingly random
interactions.

> [2]  This doesn't mean that the system can't be made substantially
> more efficient.  Of course it can, and Friedman & Co. recognize that.
> It just shows that issues of transactions costs are second-order
> issues in their scheme of things.

I disagree that it is a second-order issue when you spend 10 man-hours
of work for a transaction worth at most a few dollars.

Furthermore if I am right that networks are a good place to look at for
models of how software works, then transaction costs are likely to be
*dominant* effects, rather than second-order issues.  Please read
http://www.firstmonday.dk/issues/issue6_2/odlyzko/ ("Content is NOT
King" by Andrew Odlyzko) to see what I mean.  As he demonstrates, the
value of a network goes up the more that you can lower the transaction
costs which are associated with using it, and yet paradoxically there
winds up being far more money to be made in providing access to the
network than there is to be found in trying to supply content.

I believe that there is a close parallel with free software.  Making it
free to get and modify the software drops transaction costs.  This
results in creating a development network of more value than would be
produced otherwise.  Within that network the greatest value to be found
is in providing access, whether that access is through publishing books,
training people, providing support, or accomplishing things using your
expertise in those tools.

In short the "free" in free software is justifiable as a business
decision because transaction costs are so dominant an economic effect
that you are willing to give up direct revenue to avoid them.  Of course
this decision is not a no-brainer.  But that it can be a viable choice
says that economists should think again, long and hard, about the
importance of transaction costs.

Cheers,
Ben

-- 
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