The Economista
Wednesday, April 27, 2005
  More on IPR's Lawrence Lessig of Stanford has a nice keynote speech at the Open Source Convention on the topic of IPR's , here.  9:12 PM 1 comments
Thursday, April 21, 2005
  The Economist, The Economista The Economista has read 3 editions of The Economist, cover to cover, in 3 evenings. With the aid of much plum liquer and sake. Her head is spinning from both.

Now if only she can finish the backlog of a years worth of issues on her shelf. She will return to regular programming, soon.  6:30 PM 0 comments
Wednesday, April 20, 2005
  Legal Morality and Economics [To be completed]
The conjunction of law, morality and economics is a thorny one, raising a dichotomies in so many, many issues, including:
We'll cover, in point form again, some thesis on these issues, with a topical references to the Uniquely Singapore issues: the casino and gay rights. Meanwhile, I'm still working on it.
  8:24 PM 0 comments
Monday, April 18, 2005
  The Economic Rationale of Treating Loved Ones The Background

Dr Lee Wei Ling had a letter to the forum in which she inveighed against the parents and surgeon's choices to operate. The Straits Times published letters in rebuttal, one of which is by a blogger and reproduced in full at this site.

I have to say that Dr Lee's letter didn't feel right when I read it - there was unease that I could not put my finger on. Singapore Serf's letter crystalised my thoughts on it, which were the basis for my comment to tthe unedited version of his forum letter.

The Analysis

[Soon to come, once I've fleshed out the economic theories]

  8:08 PM 3 comments
Wednesday, April 06, 2005
  The Economista Speaks
Piracy and Intellectual Property Rights

As ever, the internet debate rages on about P2P sharing, downloading and piracy. A post by a friend here triggered this.

If I were a Becker or a Posner or some academic or a hack journo, I'd have it in essay form. Or could just be bothered.

Being the lazy ass that I am, with better things to do like analysing the market conditions for the particular area of software I'm casting my chips in (who knew the market was $41 b USD worldwide p.a., not the measly US$5 b I estimated), these are the points running through my head in short:


IP distinguished from Natural Property (Part 1)
  1. Property Rights are a natural right recognised by most civilisations. Sumerian, Babylonian and Greek Civilisations evidence this.
  2. Property rights have a finite limit of divisibilty or reproduction, either in time or raw material. At the very least, you could tell where the product came from: the milk came from the cow, as did the calf. That's the fruit of THAT vine. I own that vine/cow. You can borrow my olive press for the first pressing in February for payment of an upfront option fee and a participation in the gross [ancient Greek arbitrage].
  3. IPR's are very recent innovations and are by products of the industrial revolution, where jumps in living standards were due to mechanisation.
  4. IPR's are not subject to the natural restraints that other property (and their rights) have on limits for reproduction and divisibilty.

Points on IP
  1. IPR's are monopoly rights over the particular IPR [see the different IP regimes]
  2. States confer monopoly rights on IPR holders
  3. States extend monopoly rights to IPR holders on the basis that protecting IP encourages further innovation, creativity and technical progress, which are valued as social goods
  4. The duration of these monopoly rights differ from between various IP regimes.
  5. There are limited exceptions to these monopoly rights
  6. IPR currently remains in the hands of first world countries

Specific Points on IP [for my non-legal readers]
  1. Copyright protection: Protects creative human expression, writing, music, dance (yes, dance notations) and 2D artwork and scuplture. Copyright monopoly is the life plus 75 years of the creator.
  2. Patents: Protects human innovation and technology. Monopoly for 25 years, with patent published to encourage human innovation, technological and social progress.
  3. Trademarks: To distinguish goods from others, so that consumers can associate trademark with a particular standard of quality.
  4. Yada yada yada: Geographical indications protects agriculatural goods from clear areas, ie Champagne. Registered designs protects functional designs like Coke Bottles (which aren't human expression).
  5. We're concentrating on copyright.

IP distinguished from Natural Property (Part 2)
  1. It took a fair bit of effort either in resources or otherwise to obtain monopolistic dominance in non-IP industries eg Oil, railroads. Time, money and strategy is involved. Even naturally monopolistic industries like utilities require concrete investments in infrastructure. Depending on the abundance of water resources, a clean water distribution system (pipelines and purification) for a city of 3 million often exceeds US$2b in capital spending.
  2. This is not to say that Patents do not receive equal amounts of capital investment to create their monopoly. Drug companies may spend up to US $5b developing new blockbuster drugs ie Zantac, Merck's blockbuster ulcer drug.
  3. Trademarks also require investments in marketing and production capability to create a monopoly IPR that is worth something. For perfumes and other elements of conspicious consumption, there are real figures involved in advertising and research into production methods and standards.
  4. However, for Copyright, especially in music, the same degree of capital investment in monetary terms is rarely seen. The investment of human capital is certainly present - witness the crack abusing, heroin shooting alternative bands searching for the muse. Or the writer labouring away in obscurity for years.
  5. We'll be focusing on copyright, with an emphasis on musi. Afterall, that's where the egregious piracy is occurring.

The Peculiar Problems of Copyright
  1. Given the intangibles involved in creating Copyright, the perception is that copyright is a less (montarily) valuable IP right. Usually, it's also not viewed as a tangible good deserving of IPR - you don't get to hold something in your hand
  2. Copyright, with technology starting from betamax and going on to MP3's and P2P file sharing, has been easily reproduced and violated.
  3. In contrast, the violation of Patents and Trademarks generally require real manufacturing capability. It's not something that can be done in your living room, unlike copyright.
  4. Over the years, the borders of violating of copyright IP has also been eroded by social norms - taping radio, TV broadcasts are OK. As are sharing friends CD's and tapes, either by borrowing outright or borrowing to copy. While we're at it, we can play the tapes at picnics too.....
  5. US and Worldwide courts have protected and continued to protect technologies that enable the violation of copyright on the basis that these technologies were capable of dual use. These technologies therefore have a right to exist notwithstanding that people often (and primarily) used it to violate copyright. We still have tape players and DVD-R's. And TiVio (I wonder how that functions, though....)

Monopolistic IPR's
  1. Monopolistic behaviour happens to monopoly holders
  2. This is because humans ain't stupid - monopolistic behaviour by monopoly holders maximises their personal utility. So what if people consume less - their supernormal profit margins are higher.
  3. The ability of the IPR holders to maintain monopolistic dominance depends on their abilty to
    • Segment markets to maximise markets for their utility. Ie Charge Poor Chinese less money for IP goods and Rich Americans more.
    • Prevent reproduction or market entry of competing products, real, fake or substitutes by meeting market demand in delivering:
      • the right product (including choice, right format. language etc)
      • the right price
      • increasingly, the right time
      • enforcing their legal rights
The Reason Piracy Exists - Monopolistic Misbehaviour of Copyright IP holders
  1. Monopolisitic behaviour has been exercised consistently by IPR holders
  2. Some examples of their Monopolistic Misbehaviour:
    • Failure to segment markets tightly. Shit happens, so does globalisation.
      • The invisible hand of the freemarket, on the finger known as arbitrage has agents selling the equally legitimate $5 CD from China in the US market for $10, instead of the $15.99 list price. So what if it has little chinese characters on it? Most people live with it.
      • The other invisible finger on the invisible hand known as information (as delivered by the internet) creates opportunities for individuals to perform their own arbitrage by online ordering or pricing.
    • Failure to get the right product:
      • Selling CD's of 10 songs when you only want one song
      • Selling CD's instead of MP3's that you need to download
      • Anime in Japanese, not English
    • Failure to get the right price
      • Selling CD's for $20 when you only want one song
      • Selling a CD of a single song that you want for $10
    • Failure to get the product at the right time
      • DVD editions in Singapore are often available before the movie shows in secondary, foreign language markets like germany, where a significant minority of the population understands english. Similarly, why are we stuck watching the last season of B-grade TV shows like the Bachelor V when the newest season of the B-grade show Bachelor VI is showing?
      • Japanese anime often takes years before it is licensed for translation to English
  3. In other words, Monopolists do as Monopolists like which is screw the customer, they have no alternatives. Forget customer service, customer needs - let's just behave as we see fit. Let's rely on our legal rights and not do anything about our product.
  4. As a result, there has been a backlash by the freemarket (and individual agents) against the failure of monopolistic IP copyright holders to meet norms of customer service and customer needs.
  5. Examples of the backlash of the freemarket:
    • People are performing their own arbitrage in response to segmented markets, via the internet - why should the guy in the country down the road pay a fraction of what I pay for my copyright IP on CD's and DVD's. Shouldn't there be one price to rule them all?
    • Failure to get the right product:
      • Format: Why have CD's which you have to rip to MP3's for your iPods when you can get them directly as MP3's and free? Or have physical discs when you can download.
      • Language: Why have Japanese when you should have English.
      • Distribution is still physical involving effort and time, as opposed to a click of the finger ie Supernova.
    • Failure to get the right price:
      • Supernormal profits have attracted pirates, who offer the exact same product to the customer.
    • Failure to get the right time
      • Japanese Anime is released on the internet subtitled in English 24 hours after the first broadcast in Japan. Fan-subbing groups voluntarily organise themselves and contribute in the region of 60 man hours per episode to translate, time the subtitles and proof for errors. Some fan-subbing groups have, over the last 3 years, subtitled up to 200 episodes of anime for individual series.
  6. Some Copyright IP holders have taken steps to mitigate this backlash by attempting to meet the customer demand:
    • iTunes store: $1.99 MP3 singles are the right product, at the right price, at the right time (ie, on demand, anytime)
    • Lowering original DVD prices. Prices have fallen to $14 -$20 in Singapore from a high of $35, 4 years ago.
    • Artistes, who now make less from CD royalties (not that they ever made much) have responded by relying more on non-substitutable goods such as live performances (or less substitutable goods like merchandising). They've upped live concert prices and increased the number of shows. There is also more merchandising.
My 2 cents worth
  1. There is no such thing as "it's just wrong to download music". This is because this statement is based on laws which in turn are supposed to reflect norms. The law states that downloading music is prohibited. however, the law also states that violating copyright by unauthorised reproduction is wrong, but tolerates taping radio and tv by their failure to prosecute these copyright violations.
  2. You can't ignore customer service and customer needs. The invisible hand will smack the monopolist on the head (as is being done).
  3. It is however, well known, that the laws to not always reflect social norms as they are supposed to. Sodomy laws in the UK were repealed long after they were accepted.
  4. However, democractic societies are vulnerable to manipulation by the tyranny and cunning of minorities, even for economic and moral interests (as opposed to natural rights). The protection of minorities is both a strength and weakness of democratic society.
  5. Legal norms will have to catch up with social norms. Or the monopolists will have to serve their customers.
  12:26 AM 1 comments
A Economical (Singaporean) View of the Political and Legal Hills

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April 2005 /


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