New Research: Extending Copyright Massively Increases Prices, Limits Dissemination Of Knowledge

from the stealing-from-the-public-domain dept

Way back 1841, UK politician Thomas Macaulay famously argued against the extension of copyright by saying that such monopolies:

We have, then, only one resource left. We must betake ourselves to copyright, be the inconveniences of copyright what they may. Those inconveniences, in truth, are neither few nor small. Copyright is monopoly, and produces all the effects which the general voice of mankind attributes to monopoly. My honourable and learned friend talks very contemptuously of those who are led away by the theory that monopoly makes things dear. That monopoly makes things dear is certainly a theory, as all the great truths which have been established by the experience of all ages and nations, and which are taken for granted in all reasonings, may be said to be theories. It is a theory in the same sense in which it is a theory that day and night follow each other, that lead is heavier than water, that bread nourishes, that arsenic poisons, that alcohol intoxicates. If, as my honourable and learned friend seems to think, the whole world is in the wrong on this point, if the real effect of monopoly is to make articles good and cheap, why does he stop short in his career of change? Why does he limit the operation of so salutary a principle to sixty years? Why does he consent to anything short of a perpetuity? He told us that in consenting to anything short of a perpetuity he was making a compromise between extreme right and expediency. But if his opinion about monopoly be correct, extreme right and expediency would coincide. Or rather, why should we not restore the monopoly of the East India trade to the East India Company? Why should we not revive all those old monopolies which, in Elizabeth's reign, galled our fathers so severely that, maddened by intolerable wrong, they opposed to their sovereign a resistance before which her haughty spirit quailed for the first and for the last time? Was it the cheapness and excellence of commodities that then so violently stirred the indignation of the English people?

I believe, Sir, that I may with safety take it for granted that the effect of monopoly generally is to make articles scarce, to make them dear, and to make them bad.

Indeed, they do make things scarce and dear. A group of researchers, including Petra Moser, whose excellent work we've covered in the past, have been exploring the impact of copyright term extension on works, and it shows pretty unequivocally, that copyright extension has a pretty massive impact by raising the cost of books (pdf) as the copyright is extended. This important research suggests that other research, arguing in favor of copyright term extension by saying that it has no such impact, may be incorrect.

This is important, because we're quickly approaching the time when we're likely to see renewed efforts towards copyright extension, and we've already begun to see attempts by copyright maximalists to argue for perpetual copyright. Stan Liebowitz, for example, has been trying to argue that copyright extension (or even perpetual copyright) is a sensible position, because the public domain is somehow an unfair "tax."

The truth is the opposite. Copyright extension is an unfair tax on the public by doing the exact opposite of the claimed purpose of copyright. Over and over again, we are told that copyright is important in increasing access and diffusion of knowledge -- but this new research shows the opposite. It shows that for every year of increase in copyright term, the price of an item increased by 8%. Add things up on a 20 year copyright term extension, and we're talking about a rather massive monopoly rent (tax) from the public directed to the heirs of certain creators.

This latest research looked back at the UK Copyright Act of 1814, which has some specific features that made it easier for the researchers to compare different cases and to pretty conclusively exclude other factors as being the causes of the price difference. Much of the paper is taken up explaining the details, and you can dig in if you'd like, but suffice it to say, this appears to be a case where the researchers had enough data that they could isolate the impact of copyright term extension specifically by using the fact that the Act increased copyright term for dead authors, but not the living. And the impact was clear:

Difference-in-difference analyses of these data indicate that extensions in the length of copyright led to a substantial increase in the price of books. Regressions with author and book age fixed effects indicate that – after the length of copyright for dead authors doubled from 14 to 28 years in 1814 - the price of books by dead authors increased by 20.02 additional shillings compared with books by living authors. Compared with an average price of 17.79 shillings for all editions after 1814, this implies an increase of 8 percent for each additional year of copyright, and an elasticity of price with respect to longer copyright of 0.9. These estimates are robust to controlling for genre, literary quality, and physical characteristics (page numbers and book sizes). Estimates of time-varying effects indicate that these effects became statistically significant six years after the Act, with no significant pre-trends.

Simply put, the impact of copyright term extension was to massively increase the cost of books by authors covered by that extension. Comparing it to works not covered by the extension showed no similar increase in price. Furthermore, additional explorations ruled out nearly all other possible explanations, showing that the results here were robust.

In case it's not clear, the argument was that the price of books effectively doubled for those dead authors covered by the extension, all because of a single term extension:

Summary statistics indicate a substantial increase in the average price of books by dead authors compared with books by living authors after 1814. For books that had been in print for 14 years or less (which were affected by a differential increase in the length of copyright for books by dead authors), the price of new editions of books by dead authors nearly doubled from 17.69s between 1790 and 1814 to 33.39s between 1815 and 1840.... By comparison, the price of books by living authors declined from 17.64s until 1814 to 17.13s after 1814.

In case you were wondering, before such copyright term extension, those books by dead authors were actually cheaper than the books by living authors, though the numbers were so close as to suggest the prices were effectively equivalent... until copyright term extension entered the equation.

Baseline regressions confirm the differential price increase for books by dead authors. Estimates for dead indicate that, until 1814, books by dead authors sold for 6s less than books by living authors....

The research further supports this massive cost of copyright extension by showing that books that go off copyright get cheaper:

Price data also confirm that books became cheaper after they went off copyright. The median price of 1,072 editions in the data is 10.5s if the title is on copyright, and 9.0s if the title is off copyright, which implies a 15 percent reduction in price. For example, the price of Reverend William Paley (1743-1805)’s book A View of Evidences of Christianity (first edition in 1794, under copyright until 1808) declined from 12s in 1794 to 9s in 1820 and 4.5s in 1824. Lower prices for books off copyright are confirmed by modern data on the price of early 20th century bestsellers: 20 popular bestsellers first published between 1923 and 1932 and still on copyright sold for an average price of $8.05 in 2006, compared with $4.45 for 20 popular bestsellers first published between 1919 and 1923 and off copyright

What this means is that the deadweight loss to the public is really quite massive. Rather than these books declining in price and making them more affordable to the masses, the exact opposite appears to happen: they tend to double in price. They become more expensive. And this goes exactly against the intent of copyright to make such works more available:

... our findings imply that longer copyrights raise the costs of accessing intellectual assets for consumers and other firms, which may discourage the diffusion of knowledge and decelerate the pace of cumulative innovation and learning-by-doing.

As we begin to see a concerted effort by the entertainment industry to expand copyright terms once again, it's important to question whether or not we really want this sort of clear tax on knowledge and limits on the sharing of ideas and knowledge.