[LINK] DVD pirating costing industry $1.7b: Debus

David Boxall david.boxall at hunterlink.net.au
Sun Nov 9 13:19:22 AEDT 2008

On 8/11/2008 at 11:00 PM Craig Sanders wrote:
> PS: if you assume for the sake of the argument that the figures are
> true, then that means there's about 99+% of 1.7 billion dollars
> staying in the local economy rather than going overseas to Hollywood.

> In economic jargon, charging /anything/ for pure IP—which has a 
> marginal cost approaching zero once it has been produced—creates a 
> deadweight economic loss, at least in static terms. The actual net 
> loss of IP infringement is an /allocative/ loss that only appears in a 
> dynamic analysis. Simply put, when people pirate IP, the market is not 
> accurately signaling how highly people value the effort that was put 
> into /creating/ it, which leads to underproduction of new IP. To 
> calculate the /net /loss to the economy over the long run, you'd need 
> to figure out the value of the lost innovation in which IP owners 
> would have invested the marginal dollar lost to piracy, and subtract 
> from that the value of the second-best allocation—which is to say, 
> whatever the consumer of the pirated good spent his money on 
> instead—and the value of the deadweight loss (free music or software 
> is a net economic benefit to someone) incurred by pricing IP at all.
> If that sounds incredibly complicated, it is. And in fact, it's more 
> complicated than that, because as Yochai Benkler has argued 
> persuasively 
> <http://cyber.law.harvard.edu/wealth_of_networks/Main_Page>, IP is an 
> input to innovation as well as the product of innovation. So under 
> certain very specfic conditions, "piracy" can produce net gains. While 
> it seems extremely unlikely that this is the case in the aggregate—IP 
> theft almost certainly does impose net economic costs—/simply/ 
> calculating lost sales and licencing fees, assuming someone could 
> produce a credible figure, would not provide a complete picture of the 
> economic impact of IP infringement. It would give us, at most, one 
> side of the ledger.

David Boxall | Drink no longer water,
| but use a little wine
| for thy stomach's sake ...
| King James Bible
| 1 Timothy 5:23

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