Friday, January 06, 2006

How to achieve true freedom of information

An earlier article received criticism from someone who felt that (paraphrasing) "it is wrong to get something for free when the material was not meant to be free." He gave the example of a painter who wants only a certain number of prints to be available. But, I asked, why would it be inherently pleasing to a painter for copies of his painting to be scarce?

Now, he didn't answer, and I'm not a painter, but I will venture anyway to respond that scarcity is not something that normally brings satisfaction to a creative worker. Normally, if I wrote a book, I would be glad if millions of people read it. If I were a painter, I would be glad if each of a million people hung a copy on their wall. As a programmer, I would be glad if a million people used my programs.

Indeed, nothing could make me happier than to write a program that millions of people use and find useful. Nothing, that is, except to live in a house, eat food, and someday in the future, provide for my wife and children. The problem is that these desires are at odds with each other in our present system of intellectual property.

Most people don't even realise there is a problem. They take for granted that they have to pay for books they read (unless they get it from a library); that cable costs a lot, yet is still saturated with advertising, and sometimes has nothing worth watching on 50 channels; that music comes on discs, and starts at $10 new; that some software is utterly unaffordable, yet a lot of software is free; that they can't simply watch any movie on their computer that came up on a Google search; and that if they can't afford a creative work, they have to do without, or break the law and pirate it. Most of all, they take for granted that they can't enjoy all the works they want to, even though doing so would have no negative effects beyond wasting time.

Meanwhile, authors take for granted that they have to charge money to make money, and that free use of their work can only be allowed at the expense of their own bottom line. Even the most idealistic free software developers take for granted that by giving away their source code, they cut off potential revenue sources (though often not all of them.)

Yes, these are the facts of our world as it is now. But we should realise that these things are a result of our laws and of the power structures in our society. And, thanks to the efforts of misguided diplomats, big corporations and WIPO, similar structures are in place all over the world. However, none of these things are inherently a part of the human condition, so with enough will, they can be changed.

In this article I won't try to say how to change the system, but rather how a hypothetical system might work, because right now we are stuck so firmly in the status quo that alternatives never even cross our minds. Hence, education is the order of the day. My goal is to convince you that another way is possible, so you can stop seeing the intellectual property system as a fact of life, as "a necessary evil", or as related in any way to real property.

As you read this, if you feel it is unrealistic, keep in mind that it is only one of many possible implementations. Forgive my shortcomings, as I'm studying to be a computer engineer, not an economist.

Imagine that the U.S. federal government were to create an institution in charge of managing a "pseudo-public domain" (PPD). Authors and artists (including programmers like me) would have the choice to place their works in this domain or to use the standard IP system that we have now. Most likely this choice would be on a per-work basis.

I'm gonna call this institution the financial institution for information freedom (FIFIF) because its objective is to provide financial support to people who wish to allow everyone to use the products of their creative efforts, which, for the sake of a cool acronym, we will refer to as "information".

The PPD would have most of the freedom of the public domain (PD), but with added measures to reward authors and artists who place their work in it. These rewards would come from the public purse, and reward ("payout") calculations would be based on free market principles.

Residents of the U.S. or people who pay U.S. income tax would be "PPD benefactors" (PPDBs.) PPD works would be sold or otherwise provided under the regular IP system elsewhere in the world. People and companies who are not PPDBs would be legally subject to the terms set forth by the artist/author of the work for non-PPDBs. The enforcement of these terms would probably be more difficult than for non-PPD works, because piracy of PPD works would be easy and widespread (due to the freedom of the system), but I won't spend time speculating about that in this article except to note that many kinds of piracy are easy and widespread already.

I think that the FIFIF (not to be confused with the FFII) could actually grow the market for creative works. Consider the fact that I don't listen to very much new music, that I don't try mixing my own music tracks (though I would like to), that I'm not using MacOS X (though I've heard it's great), that I rarely read scholarly journals (even though they are packed with things I want to learn), that most of the video games I play are old ones I've played before, and the fact that my walls are devoid of paintings or posters. The main reason for all of this is that I'm not willing to pay the prices for the media I want. There are other reasons, too. I usually don't have free time to dabble in music creation, for instance. But the biggest reason is financial. I'm a student, and I don't think I can afford to buy new music, MacOS X (with a matching new computer), or paintings or posters. Some students will buy what they want anyway, but I'm a cautious person, and I'm not the only one.

So I have a hypothesis that people would use more creative products if they were free. If this is so, then in at least one sense, free access to creative works results in a larger creative market. It does not follow, however, that this would cause the size of the creative industries, in terms of number of artists and/or per-artist revenue, to increase. On the other hand, I wouldn't predict shrinkage either (see the sidebar.)

The FIFIF would be tax-funded. It would pay artists using public money, and the public, in turn, could freely use any and every work in the PPD. A direct consequence is that the size of the PPD market equals the total budget of the FIFIF. By law, this budget should depend on the demand for the works offered, rather than being set to a fixed value by congress. However, the size and nature of per-work rewards may be determined in any number of ways. More on that later.

The obvious and key benefit of the PPD is the personal freedom it grants to every citizen:
  • The freedom to make copies and share them with others
  • The freedom to search and view works on the internet (all PPD works could be expected to appear on search engines--books, lyrics, TV shows and movies with transcripts, academic papers, and so forth)
  • The freedom to create derivative works: considering songs, for instance, anyone could legally make remixes, versions with changed lyrics or karaoke versions.
Furthermore, most "source" material of PPDs could be expected to be made available, if the law (in lieu of any contract between the creators of original and derived works) favors giving the financial benefit of derivative works to the original author. So anyone would have access to:
  • Source code of computer programs
  • Components of movies, such as audio tracks, and the components of visual effects (e.g. 3D models, animation source files, and so forth)
  • The component tracks of musical recordings (to facilitate remixing)
  • The original documents from which books are made (e.g. Microsoft Word files)
In my opinion, these benefits are huge, and well worth the disadvantages of using public money.

Economically speaking, I believe the PPD could function better than the "free" market we have now. To work well economically, the FIFIF would need to rely on massive-scale distributed decision making to distribute funding--in other words, it would use some kind of free market.

Regardless of the details of the funding distribution system--details which hopefully would be chosen by some democratic means, to encourage fairness--part of the funding decision would doubtlessly be calculated from the popularity of a work. Authors and artists should be paid more for popular works, and less for unpopular ones. Therefore, some means is needed to asses popularity.

Rather than creating laws to punish citizens for accessing or copying information they aren't supposed to, as the DMCA does, and rather than codifying copy prevention in law, the economic goals of the PPD could be served by laws designed to track usage of creative works.

For instance, web sites that provide a large amount of PPD content could be required to keep logs of PPD content downloads, and send the logs to FIFIF periodically for aggregation. Cable providers could be required to implement some kind of ratings system (you know, like Neilson ratings, but more accurate.) Google Print would doubtlessly provide entire PPD books online for free, so some kind of law would require them to measure what's being read.

Additionally--and this is optional, but may be demanded by those who want to offer valuable PPD content--the government may require that major PPD content providers not send PPD content to non-U.S. IP ranges, unless the license on a particular work allows it.

Of course, such laws would have to be written carefully to balance security, privacy, freedom, the cost burden to distributers, and measurement accuracy.

The wealth should probably not be distributed quite proportionally to popularity. For instance, if a book sells a million copies, the author shouldn't be paid one thousand times more than the author of a book that only sells a thousand copies. That's not how the record industry works even now, as the RIAA says:
Another factor commonly overlooked in assessing CD prices is to assume that all CDs are equally profitable. In fact, the vast majority are never profitable. After production, recording, promotion and distribution costs, most never sell enough to recover these costs, let alone make a profit. In the end, less than 10% are profitable, and in effect, it's these recordings that finance all the rest.
The RIAA is implementing its own subsidy system, you might say; they pay utterly unprofitable artists for their work, but they also get a huge part of the revenue from immensely popular artists.

The PPD could work similarly. For example, paperback authors could be paid proportionally to the three-quarter power of the number of copies consumed, with a certain minimum threshold, below which there is no payment. In that case, payouts might look something like this:
  • 100 copies => $0
  • 101 copies => $20
  • 300 copies => $1,064
  • 1000 copies => $3,286
  • 10,000 copies => $19,850
  • 100,000 copies => $112,384
  • 1,000,000 copies => $632,408
The payout calculation could vary depending on the type of work, and the formula could be decided by votes from consumers, votes from artists, and/or decrees by FIFIF or congress. It's hard to say how these formulas should be determined exactly, as there are many groups that need to be appeased.

Insofar as the payout depends on the type of work (e.g. novels would be worth more than novellas, and textbooks more than novels), an impartial categorization procedure would be required. I don't have a proposal for that right now.

A system like this would hopefully provide enough incentive for authors to write, and enough reward to keep popular authors from complaining.

It would also lessen the need for middlemen in creative industries. This is desirable, as one gets the impression that the big middlemen such as RIAA and MPAA companies create a lot of economic deadweight in the form of advertising, stores full of CDs (an obsolete and relatively inefficient medium), rich executives, lobbyists, and packs of ravenous lawyers. Besides that, it seems like everyone hates them.

The system would not provide up-front payment, nor pay the cost of production; content companies like the RIAA and MPAA member companies would be needed for this purpose. However, hopefully the PPD system would allow authors and artists to reject the more oppressive terms that have are now found in contracts made with RIAA and MPAA companies.

I know I haven't provided a convincing case for this last point, but I have limited knowledge of how the TV/movie/music industries function. Hopefully I can revisit the issue in the future in more detail.

The system has some disadvantages, by the way.
  • Payouts could not be sufficient for some works. All works that are expensive to make and target a small audience could not make money in this PPD framework. Works of this nature include air traffic control software, banking system software, certain esoteric technical books, and anything that is custom-made for a single company. Such works would have to be sold under the old IP system.
  • The system would have difficulty measuring the actual value to consumers, i.e. answering the question "how much would a typical consumer be willing to pay for a certain work?"; so if two pieces of software each have a million users, for instance, it would be hard to say which developer should be paid more. This effect could be mitigated with policies designed to measure this value.
  • Software is extremely malleable--in the world of open source, the distinction between one program and several programs working together is often of little practical relevance. Additionally, software is always built on top of other software, so in one sense, all software is a "derivative work". Since software can be put together in an infinite number of ways, it would be hard or impossible to determine automatically how payouts should be distributed. Also, "number of copies downloaded" isn't always an accurate measure of popularity for software. Often, one copy of a program serves thousands of users, as on a web server. I'm optimistic that these problems could be overcome with special rules designed especially for software; unfortunately, these rules may need to be continuously updated to keep up with the changing ways that software is written and used, and to combat abuses of the system caused by loopholes in the rules.
  • Derivative works in general are problematic because it's hard to figure out how payouts should be distributed. How should the payout work for a TV show that uses clips from 20 other TV shows?
  • This proposal does not attempt to address all problems caused by current IP laws, such as high drug costs and secrecy in medical research.
  • Did I miss anything?
Earlier I mentioned most of the advantages I could think of. Leave a comment if you can think of any more. Also, please let me know about about any other aspects of the problem or solution that you think must be considered. I do believe the relevant issues could fill a book, but so far I have no reason to write that book.

Remember the fundamental problem I'm trying to solve: the perversity that authors who provide freedom are impaired in their ability to make money. Ideas for smaller-scale solutions to the problem are welcome. For example, one partial solution I've discussed earlier is micropayments, a system which (if standardized and universally available) is a good solution for works that are primarily distributed via the internet, and whose cost of production is low.

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