Lessig Blog Archives

Economists who study government (public choice theorists) have since the 1970s been interested in the “Loser’s Paradox.” Can it help explain the content of our copyright and telecommunications laws?

Economists have noted that a surprising amount of government support goes to ailing sectors instead of expanding sectors. Classically, agriculture, textiles, clothing, footwear, steel and shipbuilding are the examples of industries on perpetual life support. Each has been in decline for decades, yet get more help from Government than any other. Conversely, expanding industries, like the high-tech industry, rarely if ever receive government assistance. In short, economists conclude, Government picks losers.

There are several explanation for why this is. One, associated with economist Anne Kruger, is that governments have an “identity bias” — they care more about people who lose jobs than people who fail to get jobs. Another, from economists Richard E. Baldwin and Fr�d�ric Robert-Nicoud holds that losers don’t fear market entry and so lobby harder. As a consequence, “it is not that government policy picks losers, it is that losers pick government policy.”

That’s the theory. Can the Loser’s paradox help explain the content of the copyright and telecommunications laws? I’ve long thought so. A crucial thing to understand that its not entertainment or communications that are in decline. People are probably willing to spend as much as they ever were to be entertained. Rather, it is specific technlogies or channels of distribution that are threatened– most clearly, the model of the shiny disk. These declining industries that ceaselessly demand, and get, government protection.

So seeing things this way you can appreciate that there’s not much a conceptual difference between something like the Induce Act on the one hand, and the farm subsidies for corn corners on the other. Each case features an industry that desparately wants to slow the arrival of more competitive rivals. And each are in truth, slowly dying industries whose ongoing decay poisions our economy.

So how often do you actually visit sites in other countries? How about in other languages?

If you’re like many users, the answer may “not that often” (apologies to the foreign readers of Lessig Blog). Its a small sign of the Balkanization of the Internet, a process that is happening faster than anyone is noticing. What we once called a global internet is becoming, for many practical purposes, a collection of nation-state networks, still linked by the internet protocol, but for many purposes, separate. Some of the evidence:

– In China, beyond censorship, the amount of actual data flowing in and out as compared to within the country is diminishing. A fairly recent study found 72% of information used to be domestic. And China’s non-IP “169” intranet — think the AOL walled garden turned into a jungle — is getting nearly as large as the actual Chinese internet. And why not — unlike AOL, its 80% cheaper, and has most of the Chinese content.

– Every-improving geolocation software have made big sites like Google national. As Esther Dyson writes of Google, “Google has now significantly upgraded its geographic targeting. When an advertiser buys an AdWord, it can specify geography, not just by city or region as it can now, but by a radius around a specific address or by specific geographic boundaries.” With that kind of precision, Google can easily cater to distinct national interests.

– Australia is considering a country-wide government filter, designed, for now, to keep out hard-core porn.

– Europe’s privacy laws, and cases like this one, make hosting separate web services for Europe a consideration.

– Amercian IP enforcement, as everyone reading this blog knows, makes shielding content from the U.S. markets make sense. Ditto for Australian libel laws.

– Bandwidth differences are hindering inter-connectivity. Countries like S. Korea are largely broadband, while others are mixed, and still others are primarily narrowband. Its tough for narrowband users to access sites in countries that assume broadband.

That this is happening doesn’t answer whether its a good or bad thing. So good, bad, reversable, inevitable? All this happens also to be the subject of my current book, so I’d love to hear it.

UPDATE: From the Comments
“There is significant irony in term used here – balkanization. … In short, internet is maybe the only thing that has not been balkanized in the Balkans.”
-Veljko Kukulj
“The Balkanization of the internet is one of the great things about it…. A healthy internet is not one where netizens click uninterestedly to sites of all the nations, it�s one where netizens participate.” – Branko Collin
“Right now I�d love to be able to visit the BBCs five live channels of Olympic coverage � but the ip^2 walls are preventing us. That�s an interesting story of balkanization in itself.” – James Howison
“[From China] In fact, the ongoing People�s War against Pornography did not rely that much on technology but on email addresses and phone numbers where concerned citizens could complain.” – Fons Tuinstra

If it is true, first, that widespread piracy at some point diminishes the incentives for industry to invest in new works;

And if it is true, second, that piracy is limited to a demographic, say, 15-25 year-olds (perhaps because people older than that are lazy or value their time more);

Won’t the eventual response of industry be to simply begin investing in films like “On Golden Pond,” and music like “Air Supply, Greatest Hits part 6?”

In other words, doesn’t piracy carry its own punishment? (And conversely, doesn’t paying brings its own rewards?) That’s how the rest of the market works — products follow willingness to pay. And if this is right, what are the arguments for government supplementing the punishment?