[DMCA-Activists] Maxwell: Is Copyright Necessary?

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Is copyright necessary?
by Terrence A. Maxwell
http://firstmonday.org/issues/issue9_9/maxwell/

Abstract:

Copyright is a legal mechanism for promotion of useful knowledge.
However, it is not the only means society could use to encourage
information dissemination, and several alternative models have
been suggested over the last 200 years. This article provides the
results of a dynamic simulation of the publishing industry in the
United States from 1800 to 2100, and tests the impact of
different protection schemes on the development of authorship,
the publishing industry, and reader access. It closes with a
discussion of intellectual property information policy decisions
that can be currently made, and their likely impacts on domestic
and international copyright protection.

http://firstmonday.org/issues/issue9_9/maxwell/

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> http://firstmonday.org/issues/issue9_9/maxwell/


Is copyright necessary? by Terrence A. Maxwell

Copyright is a legal mechanism for promotion of useful knowledge.
However, it is not the only means society could use to encourage
information dissemination, and several alternative models have
been suggested over the last 200 years. This article provides the
results of a dynamic simulation of the publishing industry in the
United States from 1800 to 2100, and tests the impact of
different protection schemes on the development of authorship,
the publishing industry, and reader access. It closes with a
discussion of intellectual property information policy decisions
that can be currently made, and their likely impacts on domestic
and international copyright protection.

----

Introduction

Copyright is a limited monopoly granted by the U. S.
Constitution. Both before and after the Constitution’s creation
in 1787, policy–makers debated its necessity and effectiveness in
meeting the policy goal of promoting and disseminating useful
knowledge (Jefferson, 1995; Walterscheid, 2002). During the
nineteenth century, the focus of the argument shifted to the
rights of authors to compensation against the right of members of
the public to purchase inexpensive copies of works to aid in the
dissemination of knowledge (Greeley, 1840; Carey, 1868). More
recently, authors such as Stephen Breyer (1970) and Lawrence
Lessig (2001) have questioned the economic and societal
efficiency of copyright.

The American debate about the necessity of copyright has revolved
around several issues, including the concept of authors’ natural
rights, the balance between author’s rights and the public
domain, and the economic impact of copyright on the protection of
information industries and the diffusion of knowledge through
society.

This paper focuses on the third area, particularly the economic
impacts of the copyright regime on authors, the public, and
publishers. It presents a dynamic simulation model (Ventana,
2000; Sastry and Sterman, 1992; Senge, 1990) of the publishing
industry based on historical relationships between authors,
publishers and the marketplace. It does not model the production
and sale of individual works, nor does it study the publishing
industry relative to other media industries. However, within the
framework of print publishing, the model provides a platform to
analyze the impact of high and low levels of copyright protection
and other factors on the relative economic conditions of authors,
publishers and readers over time.


Modeling publishing relations

In determining the necessity of copyright as a tool for the
dissemination of knowledge and a method for recompensing authors
for their intellectual effort, it is necessary to determine its
impact on the following groups: authors, publishers, and the
general public. Each has different economic goals and constraints
on their behavior that affect their decision–making with respect
to the creation, production, sale and purchase of information
products.

Authors, for instance, are generally motivated both by a desire
to see their writings disseminated and the necessity to maintain
a high enough standard of living to support themselves and their
families. Publishers hope to achieve a profit through the
production and distribution of books and other information
products. This they do by selling as many products as possible at
the highest possible price. They also seek to maximize the use of
their production equipment, reduce the costs of production and
distribution, and generate capital income to expand capacity. In
contrast, the public is motivated to purchase books and other
information goods at the lowest possible price, maximizing the
value they receive when purchasing information products (Greco,
1997).

These economic players and their sometimes competing, sometimes
complementary, desires represent a system of transactions found
in the book publishing industry, within which the copyright
regime plays a critical role. The expressed goal of copyright
within such a system is to protect authors’ expression by
providing protection against others taking their works without
compensation, while allowing for maximum dissemination of
knowledge for the benefit of society. This philosophy was
articulated in a Supreme Court decision handed down in 1984, in
which it was stated:

"The monopoly privileges that Congress may authorize are neither
unlimited nor primarily designed to provide a special private
benefit. Rather, the limited grant is a means by which an
important public purpose may be achieved. It is intended to
motivate the creative activity of authors and inventors by the
provision of a special reward, and to allow the public access to
the products of their genius after the limited period of
exclusive control has expired" [1].

Understanding the complexity of the publishing system within
which copyright operates is not, however, limited to
understanding the varying goals of authors, publishers and the
public. The system’s complexity, and hence the difficulty in
determining the impact of high and low levels of copyright
protection, lies also in the fact that the variables necessary to
model these relationships interact. These interactions are
summarized below.


Author interactions

Given authors’ desires to achieve a living wage, we can expect
that the total number of authors in a society will be affected by
the amount of royalties paid to authors and the demand for new
works by publishers and the public. Higher average royalties paid
to authors will attract more writers into the profession, while
lower average payments will tend to drive people into other
professions. Yet even if the average level of payment does not
allow for recompense at a level necessary for full–time
employment, a high demand for new works and the greater
likelihood of publication may attract people into the field of
authorship, In addition, the promise of copyright protection may
help attract people into the writing field, if they feel their
efforts will be adequately protected against piracy for a long
enough period to extract a payment sufficient to repay them for
the effort generated in developing their work.


Publisher interactions

Publishers, even more than authors, seek to maximize profits. In
doing so they, too, are buffeted by competing priorities and
variables. Maximizing profit is achieved by selling books at the
highest price the market will bear, while minimizing both fixed
costs (e.g. administration, plant) and variable costs (e.g.
printing, distribution, payment to authors). They are also driven
to improve their production capacity by investing in new
equipment that will allow for more production at a lower per unit
cost, and seek to increase their size and market share to a level
that discourages other firms from entering the publishing field.
Given these requirements, publishers are affected by a variety of
factors, including the availability of author works and the
prices they must pay for them, the size of the market and its
level of saturation, the number of other publishing firms
operating in their field, funds available for capitalization of
new equipment, and the technological capacity of their current
equipment. These factors, in turn, help to determine the number
of volumes publishers produce each year and the average number of
copies of each volume they print. The publishers’ goal is to
maximize both net profit and utilization of human and physical
resources (Greco, 1997).

>From the publishers’ perspective, the role of copyright is to
clarify ownership of a work by an author, and thus ensure that
the proper transfer of publication, distribution and related
rights can be effected by way of contracts. It also provides a
mechanism for enforcement against infringing acts by others.


Public interactions

As the consumer of information goods, the public is the ultimate
arbiter of a work’s commercial success or failure. On a general
level, the public’s ability to purchase a book is based on its
ability to find a volume in its area of interest, literacy level,
the book’s price and the availability of surplus income for book
purchases.

The public’s perception of copyright protection is conflicted. On
one hand, copyright is seen as a mechanism to provide a just
reward for authors’ labor, consistent with communal notions of
fairness. On the other, individuals seek to access information at
the lowest cost. In this regard, copyright, if viewed as a
mechanism for increasing the purchase price for consumers or as a
means for controlling the marketplace, is seen as at best a
nuisance and at worst a barrier to the free flow of information.
The degree to which copyright might be viewed as a positive or
negative value would depend on the degree to which it is
perceived as impeding the flow of low–cost information products.

In short, the relationships and key variables in the publishing
industry can be summarized in the following Figure 1.


Figure 1: Relationships in the publishing industry.

http://firstmonday.org/issues/issue9_9/maxwell/figure1.gif

In order to adequately model the relations outlined above, we
require a simulation environment with a requisite level of
complexity to capture multiple interactions over time. To achieve
this, we utilize a system dynamics computer environment (Ventana,
2000) designed to model the impacts of policy options on complex
systems, where the endogenous structure of the relations among
parts of the system generates behaviors that may not be apparent
by studying dyadic and linear relations among a limited number of
variables. In order to model the relations noted above, a
multi–variable model, containing linear and non–linear equations,
was developed (A list of the model variables is included in the
Appendix). The following figure provides more detail about the
causal interactions among variables in the model, and the
direction of impact a variation in one key variable will have on
others to which it is connected. For example, an increase in
capital investment will lead to an increase in production
capacity, which accounts for the positive sign at the head of the
arrow connecting these two parts of the model. In contrast, an
increase in market saturation will decrease the average price of
books. Hence a negative sign is appropriate for this connection.


Figure 2: Summary of causal relations among model sectors.

http://firstmonday.org/issues/issue9_9/maxwell/figure2.gif

Assuming the relationships identified above are accurate, it is
possible to quantitatively model their interactions, and identify
the impacts of different policies on the behavior of this system.
The following provides an analysis of the impact of intellectual
property protection on the development and payment of authors,
the size and health of the publishing industry, and the capacity
of readers to access works. It is based on an historical view of
publishing industry development based on data about American
publishing during the nineteenth century (Bradsher, 1966; Lea,
1885; Lehmann–Haupt, 1939; Tracy, 1913; Unger, 1998).

The choice of an historical perspective is due to the following
reasons. First, the U.S. Constitutional rationale for providing
monopoly protection was based on the assumption that providing a
limited monopoly for authors would lead to "the progress of
science and the useful arts" [2] and provide a means for
knowledge promotion within a market society. Therefore, modeling
the effects of high and low levels of copyright protection would
provide a test of the underlying assumptions behind the
establishment of copyright monopolies. Secondly, we have
historical data available on the growth of American publishing in
the nineteenth century, literacy and population rates in the
United States during this period, and the timeline of technology
development. These provide important baseline information for
model specification and allow us to test model behavior against
reality.


Model assumptions

In analyzing the impact of copyright on the publishing industry,
it is necessary to make certain assumptions about the state of
the publishing industry in 1800, the first year of the
simulation. The following table provides an overview of some key
variables. These variables provide a starting point for analysis
and the model continually generates new conditions endogenously
as the simulation advances.


Table 1: Model Assumptions based on 1800 data

http://firstmonday.org/issues/issue9_9/maxwell/#tab1

(Sources: Bradsher, 1966; Charvat, 1968; Clark, 1960; University
of Virginia Library, 2002) 


Since the assumptions above are based on fragmentary sources and
data, it is important to determine the level of impact changes in
any variable listed above would have on the overall behavior of
the model. Sensitivity analysis was performed using multivariate
sensitivity simulations (Ventana, 2000). The analysis indicated
that the model was most sensitive to changes in the base retail
price, variable per copy costs, and market growth rates. The base
assumptions behind these variables are documented in U.S. Census
data and the letters and journals of Mathew Carey, the largest
American publisher in the 1800 time period (Bradsher, 1966;
University of Virginia Library, 2002). Although other baseline
variables were able to generate some variation in particular
sectors of the models, they were not at a level capable of
dramatically changing the results of policy simulations.


Model results

Given these assumptions and the relationships between variables
discussed above, it is possible to model the effects of a variety
of different copyright scenarios on the publishing system, and
analyze the impact on the number and condition of authors,
publishers, and the reading public over time. For the purposes of
this analysis I have chosen a one hundred year timeframe,
spanning 1800 to 1900, and tested three basic scenarios,
consistent with the most extreme positions found in the
nineteenth century copyright debate.

Authors: During the nineteenth century, the majority of authors
who were vocal about copyright felt that works should be
perpetually protected; English authors should be given the same
treatment as Americans with respect to copyright protection; and,
the position of authors should be protected against publishers
(Andrews, 1872; Sedgwick, 1882; Eggleston, 1882). With regard to
the last, this would mean that ‘work for hire’ provisions that
established the legal fiction whereby publishers could be
considered authors, resulting in a diminishment of the stance of
romantic authorship, would not be supported.

Publishers: Like authors, publishers advocated strong copyright
protection for American authors, but for nearly a century were
not unanimous in their support for protection of foreign authors.
Unlike authors, publishers argued that they should be deemed
authors for the sake of copyright, supporting ‘work for hire’
provisions (Holt, 1888; Putnam, 1909; Brylawski and Goldman,
1976; Putnam, 1915; Bradsher, 1966; Exman, 1965).

Public: At its most extreme, the public stance regarding
copyright would have supported no copyright monopoly either for
domestic or foreign authors, and no ‘work for hire’ provisions to
benefit publishers, with the expectation that any monopoly would
tend to diminish the diffusion of information and potentially
increase the cost of books (Carey, 1868; Matthews, 1887).

Due to the quantitative nature of the simulation model, copyright
protection is treated as a continuum from .1 to 1, so that high
copyright protection would be ten times stronger for authors and
publishers than as low protection. In practical terms, we might
view the differences between copyright at a level of .1 and that
of 1 as the difference between copyright levels in 1790 (with
protection for 14 years, minimal types of information products
covered, and stringent requirements for registration that caused
many books to immediately enter the public domain) and full
copyright protection (perpetual copyright on nearly all
information products with no process for public notice or
governmental registration in order to establish copyright
protection).

Table 2 shows the model scenario results based on the policy
stances of the different players in the copyright question.

 

Table 2: Results of copyright simulations, 1800–1900 

http://firstmonday.org/issues/issue9_9/maxwell/#tab2


As indicated in the table, the desired policies of authors,
publishers and public domain advocates produce very different
outcomes in a 100–year simulation, some of which run counter to
the protagonists’ stated goals. For instance, while the authors’
position led to the largest number of authors, it also generated
the lowest sales figures, and the fewest number of volumes
published. This indicates that the demand for new volumes from
authors was the lowest among the three options, and points to a
greater level of competition among authors seeking publication.
Similarly, while the reader position generated the highest level
of sales, the greatest number of different volumes, and the
lowest cost for books, it also severely constrained the number of
authors. This means that while a greater number of volumes would
be available, diversity in authorship would be curtailed. This,
in turn, would tend to diminish the likelihood of variety in
information products.

Only the publishers’ stance fit their objectives, providing the
highest relative level of profit, while maintaining the lowest
royalty levels for authors. While book sales did not reach the
level of the reader option, and the level of overstock was higher
than in the author option (indicating a greater level of waste),
the publisher’s strategy maximized their overall profit.


Was copyright the best policy option?

The model also provides us with the opportunity to ask the
question whether copyright protection was the best scheme for
increasing the number of authors, publishers, and improving
customer choice in nineteenth century America. Could there have
been other policy options Congress might have chosen to support
the progress of arts and sciences, schemes that might have
incurred less conflict and administrative and legal costs?

Nineteenth century commentary on copyright highlighted several
potential policies government could have used to support or
discourage the development of a national cultural inventory.
Primary among the schemes discussed were:

High copyright control: At its highest, this would have involved
giving authors perpetual rights, by granting their demand for
treating the products of authorship as common law property,
exempt from statutory limitations as to term (Greeley, 1840).

Limit educational opportunities for citizens: This ran counter to
the nation’s early republican ideals, and as a result was not
implemented. The impact of this policy would have been to
decrease the rate of market growth for books.

Control the retail price for books: Publishers attempted to keep
retail prices high by controlling the distribution network or
utilizing legal mechanisms to restrain trade (Bradsher, 1966;
Scribner v. Straus, 1908). This policy, if successful, would have
been similar to the policies of the English Stationers’ Company
and nineteenth century English publishers, who successfully
sought to both limit the number of printers and control the book
distribution network.

Balance author control with public information diffusion: This
would involve a tradeoff between absolute and perpetual author
rights and information diffusion, through the protection of a
public domain, and the decrease in book quality, by lowering the
variable cost of items like paper, ink, and binding materials.
This, in fact, was most similar to the policy options implemented
over the course of the century.

The following table shows the effects of these different policy
actions over a hundred–year timeframe.


Table 3: Impacts of policy options on publishing development
1800–1900 

http://firstmonday.org/issues/issue9_9/maxwell/#tab3


As shown in the table, the four policy options produced very
different results. High copyright control produced the highest
book price and the lowest number of books sold in the model. A
policy that deemphasizing public education (and hence constrained
the growth of the book market) produced the lowest number of
authors, the smallest production runs and capacity among
publishers, and the lowest profit both for authors and
publishers.

Balancing author rights with the public domain constituted an
effective balance relative to high copyright and small markets.
It produced the second highest number of authors, the highest
author income, the lowest retail price, the second highest sales
level and volume production, and the highest profit levels for
publishers. However this result came at the expense of lowering
product quality and constraining the number of major publishers.

The most surprising policy result was the success of artificial
price control, which provided employment for the largest number
of authors at the second highest income levels. In addition, it
produced double the number of publishers as other options. Retail
book prices at the end of the period were the second lowest among
all the policies, and sales the highest. The one negative effect
of this scenario was the tendency toward over–production of
books. While this result allowed for more consumer choice among
competing products, it also generated more waste from an economic
perspective.

Why was the retail price control option effective? It can be
explained by the condition of the American publishing industry at
the beginning of the nineteenth century, particularly with
respect to a shortage of capital for expansion (Carey, 1942). By
maintaining artificially high prices, publishers in this scenario
would have been able to generate and utilize excess profits for
capital development, allowing for more rapid expansion of the
publishing industry than otherwise could occur. To illustrate,
Figure 3 shows the growth of capital across the four scenarios,
and indicates the most rapid development of capital in the "high
price" scenario.


http://firstmonday.org/issues/issue9_9/maxwell/#fig3

The impact of early capitalization can best be seen when compared
to other alternatives. The following figures show the dynamics of
publishing based on two different policy scenarios, high initial
prices (leading to early capitalization) and the second most
effective scenario, a balanced approach with moderate copyright.
Figure 4 shows that early capitalization caused by the control of
retail prices kept the price of books artificially high for only
a short period of time (approximately 10 years) until the
increase in capacity began to drive prices downward. The numbers
of authors, publishers, and volumes published all rose steadily
(while authors’ royalties increased rapidly), and then fell as
supply caught up to demand.


http://firstmonday.org/issues/issue9_9/maxwell/#fig4

In contrast, Figure 5, showing the dynamics of the balanced
approach with moderate copyright levels, indicates a slower
growth of publishers, authors and volumes. In addition, publisher
capacity increased more slowly, meaning that retail prices took a
longer time to drop.


http://firstmonday.org/issues/issue9_9/maxwell/#fig4


The future of copyright

The results of the simulations above show that copyright
protection, from an economic and policy standpoint, while good
for authors, was not the most efficient policy the founders could
have implemented to promote the rapid growth in the progress of
arts and the sciences. Given the conditions of the publishing
industry in the United States at the beginning of the country, a
short–term policy of price controls would have had better
long–run positive effects.

This of course raises the question whether such a policy could
have been implemented. Certainly, Jefferson’s correspondence with
Madison lends doubt to the founders’ willingness to establish
systems that would have been perceived to disadvantage citizens
and help create monopolies (Waltersheid, 2002). However, in light
of the history of early tariff policy (Taussig, 1967), we can
state that the United States was generally protectionist
regarding the nurturing of native industries, and certainly a
theoretical case could be made that internal controls were no
different than external ones with regard to their impacts on both
consumers and producers.

Given these results, does it make sense to implement price
controls at the beginning of the age of digital production and
distribution? To test this and other policy options, the same
model was used to run extended simulations projecting to the year
2100. In doing so, the model was modified slightly to mirror the
real increases of copyright protection embodied in the 1831,
1891, 1909, 1976 and 1998 revisions of copyright law. In
addition, anticipated changes in distribution (an average
decrease from 3 months to 2 weeks) and per unit variable costs
(an average 30 percent decrease) due to the development of
digital production and distribution were phased in over the years
from 2000 to 2020.

Five policy options were tested against the modified model. The
results of the option are summarized in Table 4 below.

High copyright protection: This option modeled an increase of
copyright protection to perpetual control, with strong
protections against piracy and infringement.

Balance copyright control with public information diffusion: This
policy would involve a rollback of copyright protection to levels
below current conditions, through policies such as a decrease in
the years of protection and restraint on technical controls over
electronic distribution and copying that negatively impact the
first sale doctrine and fair use.

Limit public education: A shift to a more modest market growth
(one percent) was tested in this simulation. This assumes that
American market growth would start to slow as population growth
slows and the level of literacy reaches its upper limits.

Improve access: This envisions an aggressive policy of market
expansion (modeled as an increase of one percent over the base,
to a total of four percent per year), both through strong
educational incentives in the United States and aboard, and a
strong presence of American publishers in an international market
characterized by improved literacy.

Control retail prices: A policy of retail price control that
would immediately increase retail prices for information prices
by 30 percent, either through policy interventions or
technological controls on information products, was modeled in
this simulation.

 

Table 4: Impact of policy options on publishing industry through
year 2100 

http://firstmonday.org/issues/issue9_9/maxwell/#tab4


Table 4 shows that, in contrast to the simulation of early
publishing conditions, controlling retail prices today would not
be an effective policy. Instead, the rapid development of new
markets through improvement of access is of far greater
importance. This is because the publishing market is in a mature
stage, with enough capacity to produce new products in order to
meet increased demand. As such, a policy of improving literacy
both in the United States and abroad, while insuring open access
to new markets, is the best policy option among the alternatives
studied.

A comparison of strong copyright control and one that balances
authors rights against the public domain shows only moderate
impacts on the market, with the exception of a significant
difference in the total number of authors (better with high
copyright protection) and author royalties (better with moderate
protection).

It is important to note that the model does not include the
administrative and legal costs associated with different policy
options. For instance, are the costs necessary for policing and
enforcement of copyright and other intellectual property claims
greater than those of implementing price controls, or promoting
improved literacy? These and other potential impacts of copyright
protection, digital distribution and production, and other
variables were beyond the scope of the current model.


Discussion and conclusion

The results of the policy simulations have important implications
for policy makers and copyright scholars. First, they show that
the presence or absence of copyright protection is most critical
to the number of authors in a society, but has little effect on
publisher expansion and profits, or on consumer prices. To the
extent that society seeks to promote the growth and diversity of
authorial perspectives, copyright can be an effective policy
choice. This raises the related question whether recent efforts
to expand corporate authorship through expansion of ‘work for
hire’ provisions (Rosenthal, 2000) act in concert or
contradiction to the policy benefits of copyright protection.
Given the fact that a weak ‘work for hire’ copyright regime is
most beneficial to individual authors, the answer seems to be
that the expansion of ‘work for hire’ runs contrary to the
positive policy effects of copyright.

Secondly, the simulations show that the same policy options have
different effects depending on the condition of the publishing
industry at any stage of development. During early stages of
development, capital requirements are far more critical to the
overall health of a publishing community than copyright or other
policy options. This has implications when viewing American
copyright policy from the perspective of developing countries.
While some commentators have suggested that strong copyright
protection is beneficial to third–world development because it
attracts overseas capital investment (Maskus, 2000), this
theoretical advantage must be balanced against the internal
capacity of societies to support the development of internal
publishing capacity, native authorship and an internal market for
domestic information goods (Friedman, 1999). While the present
model does not simulate the multi–country dynamics of information
sale and production, we can see from the simulations of the early
American publishing industry that an open market approach with
strong international copyright protection might attenuate the
ability to develop domestic publishing capacity, thereby
retarding the growth and health of publishing and authorship in
developing countries. In contrast, the model suggests that a
system of developing country trade protectionism, coupled with
moderate copyright protection and initial price controls, might
be more beneficial to the development of domestic publishing in
third world countries. This, of course, runs contrary to trade
policies advocated by the United States and the World
Intellectual Property Organization, but is generally consistent
with early United States trade and copyright history.

Additionally, the impacts of copyright and other policy options
on mature publishing industries have important implications for
current debates about copyright in the digital age. The
simulations indicate is that current efforts to strengthen copy
control over information products in order to keep prices at a
level similar to pre–digital periods is not necessarily the best
policy direction. As indicated in Table 4, artificial efforts to
maintain or increase prices in mature markets leads to less
choice in books, lower publisher profits, and over–production of
information products. In contrast, an aggressive policy of market
expansion, both internally and externally, would be far more
beneficial to all concerned. To the degree this policy could
include the expansion of educational and information access
opportunities and support both at home and abroad, it might meet
with little resistance. However, if American publishers attempt
to expand their markets overseas through overwhelming domestic
information markets in smaller and less developed countries, they
are likely to meet resistance from countries attempting to
protect fledging publishing industries and native cultures.

Finally, returning to the original question regarding the
necessity of copyright, we come to different conclusions from
commentators who advocate for the absolute necessity of this
legal mechanism for the promotion of information. However, our
conclusions are also at variance with those who advocate its
abolition or at least a significant relaxation of current
constraints. Rather, we suggest that copyright should be viewed
in relation to other potential policy options and to the goals we
wish to achieve in supporting intellectual production and
distribution both nationally and internationally. As such, any
adjustment to the level and degree of copyright protection must
be considered in relation to decisions about trade, education,
literacy and technology, to achieve and maintain an effective
balance between promotion of new knowledge and a healthy public
domain. 

About the author

Terry Maxwell is Assistant Professor at the Graduate School of
Information Science and Policy, University at Albany. E–mail:
address@hidden

 

Notes
1. Sony v. Universal Studios, 464 U.S. 417 (1984).

2. U.S. Constitution, Article 1, Section 1, cl. 8.

 

References
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S. Breyer, 1970. "The uneasy case for copyright: A study of
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E.F. Brylawski and A. Goldman (editors), 1976. Legislative
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A.J. Clark, 1960. The movement for international copyright in
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Appendix: Model variables
Publishing sector
Capital per publisher=capacity per publisher*cost per unit of
cap. change
Capacity per publisher=production capacity/publishers
Production capacity= INTEG (capacity adj-depreciation rate,36000)
Books produced= INTEG (production-shipped,36000)
Depreciation rate=production capacity*0.004
Cap. adjust time=6 ~6 months time to adjust capacity
Capacity adj=((capital investment/cost per unit of cap.
change)*technology multiplier)/cap. adjust time
Capacity adjustment=production capacity
Knowledge diffusion
f([(0,0)(100000,0.02)],(100,0.006),(1000,0.008),(5000,0.01),
(10000,0.015), (100000,0.016))
Technology multiplier=1+(knowledge diffusion f (knowledge
diffusion capacity))
Knowledge diffusion capacity=adj. volumes published*saturation
distribution effect
Net Profit= INTEG (income-outlays, 18648)
Outlays=authors royalties+capital investment
Profits per publisher=Net Profit/publishers
Gross revenues=sold*adj per unit price
Net/gross=Net Profit/gross revenues
Income=adj. revenues-production costs
Funds available for distribution=Net Profit*0.9
Adj. revenues=gross revenues*(1-(distribution discount+admin
costs))
Capital investment=funds available for distribution-authors
royalties
Publishers= INTEG (new publishers,18)
New publishers=((capacity per publisher*market saturation*per
book production costs)/capital investment) /publisher time to
adjust
Publisher adjustment=publishers/base publisher number
Publisher time to adjust=3 ~months to adjust number of publishers
Adj. production run=(base production run+adj vol/run
ratio)/publisher adjustment
Adj. volumes published=capacity adjustment/adj. production run"
Adj vol/run ratio=capacity adjustment/(base production run*market
saturation effect)
Pressure for new volumes=adj. volumes published/volumes available
Variable cost per unit=0.34*(1-(technology multiplier/6))
Production costs=(fixed cost per volume*adj. volumes
published)+(variable cost per unit*adj. production run\*adj.
volumes published)
Production=adj. production run*adj. volumes published
Per book production costs=production costs/production
Shipped=books produced
Books for distribution= INTEG (shipped-sold,36000)
Sold/production=sold/production
Sold=MIN(potential unit sales, (books for distribution*saturation
distribution effect)/time for distribution adj )

Author sector
Authors= INTEG (new authors,300)
Authors royalties=funds available for distribution*(base royalty
rate*literary property effect*work for hire adjustment)
Royalties per author=authors royalties/authors
Volumes available=(authors+foreign authors)*output per author
Author adj.=(copyright vol adjustment*wage adjustment)*authors
New authors="author adj.-authors)/author time to adjust
Wage adjustment=(royalties per author)/living wage

Intellectual property variables
Work for
hiref([(0,0)(1000,10)],(0.5,0.7),(0.9,0.75),(1,0.8),(1.2,0.9),(2,1),(30,1.1),
(100,1.2), (300,1.3), (500,1.4))
Work for hire adjustment=work for hire f(((pressure for new
volumes+publisher adjustment)/2)/work for hire condition)
Trade courtesy=net/gross*market price adjustment ~Trade courtesy
is highest when there is scarcity in the market, causing a demand
for all books produced
Literary property effect=(copyright effect*0.7)+(trade
courtesy*0.3)
Copyright vol adjustment=pressure for new volumes*literary
property effect

Reader sector
Market saturation effect=market saturation f(market saturation)
Books per customer sold=sold/market
Mkt. change=market*(market growth rate/12)
Market= INTEG (mkt. change,1.89e+006)
Funds available=market*funds per person
Market saturation=MAX(0.01,(books for distribution/market))
Market saturation
f([(0,0.5)-(10000,3)],(0,1),(2,1.5),(10,0.95),(20,0.9),(50,0.85),
(100,0.8), (500,0.75), (1000,0.7))
Adj per unit price=base per unit price*market price adjustment
Market price adj
f([(0,0)-(10000,2)],(0,1.2),(0.5,1.2),(0.8,1.1),(1,1),(1.5,0.9),(2,0.8),
(3,0.7), (4,0.6), (5,0.5),(11,0.33),(25,0.2)) ~As market
saturation increases, price decreases. Starting at .5 books per
person, the price is 100%, but decreases to 90% at 1 book per
person, and 20% at 10 books per person
Market price adjustment=market price adj f(market saturation)
Potential unit sales=funds available/adj per unit price v Sat.
distrib.
f([(0,0)-(10000,1)],(0,1),(20,0.98),(40,0.95),(60,0.9),(80,0.85),(90,0.8),
(100,0.75),(1000,0.6))
Saturation distribution effect=sat. distrib. f(market saturation)

Policy levers (altered to simulate different environmental
conditions)
Work for hire condition=0.01 (Range .01-1)
Foreign authors=200 (Range 200-500)
Base royalty rate=.16667 (Range .05-.2)
Base publisher number=18 (Range 10+)
Market growth rate=0.03 (Range .01-.05)
Copyright effect=1 (Range .1-1)
Funds per person=2 (Range $.50-5.00)
Author time to adjust=48 (Range 36+ months)
Base production run=1000 (Range 800+)
Time for distribution adj=3 (Range .5+)
Living wage=100 (Range $50+)
Admin costs=0.1 (Publisher administrative costs. Equilibrium 10%
gross revenues. Range .05-.2)
Distribution discount=0.2 (Discount for retail distribution.
Equilibrium 20% gross revenues. Range .10-.5)
Fixed cost per volume=192 (Costs for setup, editing and prepress
for each volume. Set in equilibrium at $192, based on Carey
numbers of 1800. Range $100+)
0utput per author=0.12 (Output per month. Equilibrium is .12, or
one volume every 8 months. Range .05+)
Base per unit price=1.5 (Base price per book sold. Equilibrium is
$1.50. Range $.10+)
Cost per unit of cap. change=10 (Range 1+. $10 = equilibrium)


--------------------------------------------------------------------------------

Editorial history
Paper received 31 March 2004; revised 9 May 2004; accepted 24
August 2004.


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Copyright ©2004, First Monday

Copyright ©2004, Terrence A. Maxwell

Is copyright necessary? by Terrence A. Maxwell
First Monday, volume 9, number 9 (September 2004),
URL: http://firstmonday.org/issues/issue9_9/maxwell/index.html

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