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Pardon me, but this is total bullshit. Piracy is not market correction. There is no reason a particular product has to be priced relative to the marginal cost

Pardon me, but this is total bullshit. Piracy is not market correction. There is no reason a particular product has to be priced relative to the marginal cost of production. According to his logic, an audio cd should cost less than a dollar. Producers can price their product however they want. Consumers have the choice to buy it if they can afford it. Trade happens only if both parties think that they are getting value out of it, econ 101. Unfortunately in digital age, a consumer can get the product by illegal means even if they can't afford it and producer doesn't really have a way to stop this illegal behavior. I am surprised that this post reached top of hacker news.

randallsquared 17y ago
According to his logic, an audio cd should cost less than a dollar. While I don't agree with the original post, this is not an argument against it. Unfortunately in digital age, a consumer can get the product by illegal means even if they can't afford it and producer doesn't really have a way to stop this illegal behavior. I agree, except I would say "fortunately". Monopolists should not have a legal right to their market, even if the market (for Metallica songs, for example) didn't exist before they began selling in it.
- cellis 17y ago
  "Should" and "should not" are normative statements, and have no place in economic discussion.
  - dantheman 17y ago
    Copyright is not a real right, it was created to encourage innovation and production. Hence, whenever dealing with copyright should and should not have a place.
    - deleted 17y ago
      [deleted]
    - cellis 17y ago
      Insofar as a country says "copyright" is a law, it is a real right. But that isn't what i'm saying. I'm saying that making statements based on moral judgement based on economics is wrong.
      - dkersten 17y ago
        Sure - but - copyright was created (for the same reasons as patents) to drive innovation. To motivate people to put time and effort into creating something. When it fails to do this, then it should not be a real thing anymore. Now, I'm not saying that copyright doesn't do what its meant to (patents are another story however...) and I'm not arguing that copyright should be eliminated.
  - randallsquared 17y ago
    When I say "should" in this context, I'm expressing my preference about laws, not making any kind of statement about an objective morality.
- albertsun 17y ago
  Why should Metallica not have the legal right to monopolize the market for Metallica songs?
  - cellis 17y ago
    http://en.wikipedia.org/wiki/Normative_statement http://en.wikipedia.org/wiki/Normative_statement There is no way to prove this right or wrong. It is just a bad statement to make in the context of economics.
    - albertsun 17y ago
      On the contrary, there are several different ways to interpret "should" and much of economic literature is focused on making those interpretations. For example, is a given policy economically efficient? social welfare maximizing? from a firm's perspective, profit maximizing? or more generally, does it lead to a society that you would want to live in?
- solutionyogi 17y ago
  I am not sure why the audio cd analogy doesn't hold. Quoting the original post: "Software ISN'T a t-shirt. A t-shirt needs cotton. That cotton must be dyed, woven, sewn, printed, packaged, shipped. Software ISN'T a meal. A meal has ingredients, and the more you spend on them, the better, and that goes double for your chef's salary. People understand where their money is going. People are just fine with paying through the nose when they get their money's worth. But no one likes to feel like they have been taken to the cleaners." Looking up on Google, I can get 500 audio cds for around 185$ (http://www.google.com/search?hl=en&source=hp&q=audio+cd+manufacturing+cost&aq=f&aql=&aqi=&oq= http://www.google.com/search?hl=en&source=hp&q=audio...), per CD cost is 37 cents. Do you think that I should be able to buy the latest album of Backstreet Boys for 37 cents? Where do you account for thousands of dollars spent on recording the album? What about paying the artists? ....you know the 'fixed costs'. We still happily pay 9$ for an audio cd because it gives us pleasure which is worth more than 9$. As he says, 'getting money's worth'. Tell me again, how is software any different? You buy the software ONLY IF you think software gives you more value than it costs you to acquire it.
  - randallsquared 17y ago
    I didn't say the analogy didn't hold, but that if it held, it didn't mean the argument was wrong. Separately, I do think the argument is wrong, because it's based on the labor theory of value, which has been shown wrong.
  - doronba 17y ago
    What about long dead artists? what about recordings done many years ago, where the covering of recording prices has long been achieved Software, like most intellectual property is a Non-rivalrous good. Nothing in software design prevents simultaneous consumption, indeed, we would not have any website if that was the case. A T-shirt or a Meal is a Rivalrous good, my consumption of the meal prevents your ability to eat it. The law affords protection to non rival goods be enacting author rights, exclusivity for a period of time, copyright etc... historically the limits ware set to release non rival good to the public for its general use. Software companies, entertainment companies etc.. seek to milk those rights to no end, it will be an interesting case to see what an early mandatory release to public domain will have on piracy as a whole
- netcan 17y ago
  I'm not sure why people come out with these moral axioms whenever piracy comes up. "Monopolists should not have a legal right to their market" Such a big statement with no real way of supporting it any further (the converse is also true). None of the rules around copyright or property ever came about because of any kind of "Natural Law" or moral reasoning. John Locke, be damned. Property rules were created based on existing conventions, or in some cases, created to correspond to defensible borders. You can hum a song or talk about it or play it on your guitar when you get home. You can't sell copies of it? Why? Because printing, pressing & such are (were) possible to regulate with laws. Humming is not.
  - randallsquared 17y ago
    I'm not sure why people come out with these moral axioms whenever piracy comes up. It's not a moral axiom; it's an expression of preference. More seriously, any argument for or against it relies on so much shared understanding that it's not clear that there's much use arguing about it at a length of two or three sentences. One sentence is enough to express the conclusion, but a rigorous argument that covered all the major approaches would require a fairly hefty book. Because printing, pressing & such are (were) possible to regulate with laws. Humming is not. That's one approach, but how will you defend your right to hum whatever you want when all of your actions are recorded all the time? Our current technological progress appears to be headed that way, making automatic enforcement of any arbitrary rules possible. In that situation, the question of what the rules should be is more than a question of what sort of rules can be enforced.
bugs 17y ago
You are correct in what you say about producers pricing a product and consumers having a choice. I believe that the real issue here is that consumers now have a moral choice and for many the morality of pirating a cd from a torrent site or even burning it from a friend is not a difficult decision. You will have a hard time finding someone my age or younger (early twenties) who thinks that pirating a cd is equivalent to steeling anything; and building upon that idea many even think torrenting/pirating software and video games is an acceptable thing. I don't know what will happen with music and its distribution but one thing I can say is it probably won't stay the way it is indefinitely.
nfnaaron 17y ago
You're right that producers have the right to price. However, it's not just about price, it's also about being able to get a product in the form and through the channel that a consumer wants. This relates to the current argument about the availability of legal downloads vs pirated downloads. And wait, wait, yes, you're correct, producers have the right to determine product form and channel. :) The way that piracy can work for market correction is that it's information. A product's sales may not be performing as well as a producer would like. Is it because it's too expensive? Or do people just not want it? It could be one, or the other, or both, or other. Piracy, while illegal, is still an indication that yes, people do want the product, and it's desirable enough to break the law to get it. So what can we, the producer, change to convert those pirates and other non-consumers into paying customers? A producer could (doesn't have to) use that extra information to help him think about his product's format, or channel, or price.
- anamax 17y ago
  > it's also about being able to get a product in the form and through the channel that a consumer wants Why do consumers have the right to their choice of form, channel and price? If the seller is unwilling to provide as the consumer prefers, where does the consumer get the right to force the producer's hand? What's wrong with "if the buyer and seller don't agree on terms, the deal doesn't happen"?
  - nfnaaron 17y ago
    "Why do consumers have the right to their choice of form, channel and price?" I'm not saying they have that right, not beyond deciding to buy or not. I'm pointing out that some consumers do try to appropriate that right, and that's one indication of demand.
    - tptacek 17y ago
      It is also an indication of the demand for car stereos when someone cinderblocks my window and rips the stereo out of the dash.
  - 17y ago
deleted 17y ago
[deleted]
nfnaaron 17y ago
"I am surprised that this post reached top of hacker news." I sometimes upvote articles that I disagree with so that they'll live longer, because I want to see more discussion about them. Does anyone else do this?
- derwiki 17y ago
  That's why I originally voted this up, and why I voted you up. I wanted to see an intelligent HN discussion on the finer points of why this is bullshit.
  - mixmax 17y ago
    This is a big problem. You come here for intelligent discussions, and would like to hear intelligent people's take on why a rant is bullshit. What will happen is that over time the intelligent people will leave. The reason there is such an intelligent discussion here is that the submissions are worth discussing - if they degenerate the people that make the intelligent conversation will leave, and you will have Reddit. I read through the article, expecting to find a subtle point, an intelligent analysis or a valid viewpoint. Something to make the article worth my time. When there was none I felt a bit cheated. If this happens enough I will leave.
- mixmax 17y ago
  Yes, but only articles that have a valid point. I enjoy coming to HN because the linked articles have intellectual value, even if I happen to disagree with them. This one doesn't.
netcan 17y ago
It is bullshit. It's confusing between the economic outcome in a perfectly competitive market, "price drops to marginal costs" with a normative statement "price should drop to marginal costs." Every business article you need. Every way of gaining "competitive advantage" is a strategy for avoiding this outcome. If the moral imperative,price should drop to marginal costs, existed and was enforced, doing business would practically be illegal.
- solutionyogi 17y ago
  Bingo. You have put it way better than I did!
- camccann 17y ago
  I think the implied moral imperative is generally taken to be "markets should be freely competitive"; everything else is details. Prices not dropping is just an indicator that a market isn't competitive due to, e.g., barriers to entry or government interference. Of course, not everyone thinks free markets are morally preferable, so it's not really an imperative that applies universally.
  - netcan 17y ago
    I see what you're saying, but I don't buy it. I think if you look at the contexts where the normative statement appears , you'll find that it is a genuine mix up, not an indirect criticism of restricted markets. I wouldn't be surprised if criticism of restricted markets is part of where this comes from but it is not a rational path. Even a perfectively free market is not perfectly competitive. Perfectly competitive is a theoretical position used by economics, but it is theoretical. Perfectly competitive means profits are consistently zero, for example. If I have a nicer smile then the girl at the next shop and you prefer to shop at my shop, that's an "obstruction" preventing perfectly competitive markets. The only markets that approach perfect competition in reality are commodity markets where, by definition, all products are perfectly equivalent. This makes it even harder to get from "prices equal marginal costs if markets are perfectly competitive" to "prices prices should equal (or sometimes 'reflect') marginal costs." The implication is not just "remove government enforced barriers to competition" it is also "remove differences between you and competitors" and absurdities like "hire the same person as your competitors." Perfect competition requires perfect substitutes (competitors). Imagine a "product" that uses necessarily non-uniform inputs: a seminar. One has Jimmy Carter speaking. The other has Mohammad Khatami. For this market to be perfectly competitive, the speakers (and the location and the coffee, etc) would have to be exactly equivalent.
camccann 17y ago
Unfortunately in digital age, a consumer can get the product by illegal means even if they can't afford it and producer doesn't really have a way to stop this illegal behavior. What do you mean "in the digital age"? Ever heard the term "black market"? Of course it's a market correction, it just happens to be an extralegal one. The laws of economics don't stop applying, and the market doesn't go away, just because a producer has been granted a government-enforced monopoly; no matter how appealing the notion is, making something illegal doesn't make it magically disappear. I have little doubt that producers could find ways to successfully sell their products anyway, but that would require sucking it up and admitting that they have to compete on actual value, instead of relying on massive government market intervention.
- solutionyogi 17y ago
  Show me one example of a black market where consumer can get the EXACT same product as available in open market for FREE and if it is as easy as clicking a button on a screen. Forget free, you will be hard pressed to find an example where black market offers a product which costs less. Black markets happen when consumer want something but they can't buy it legally (e.g. drugs, organs etc.)
  - aniketh 17y ago
    The currency market in India for exchange rates in the black market till sometime ago gave better rates than legal conversion.
    - nico 17y ago
      It still happens in Cuba: dollar to cuban convertible pesos, it is cheaper on the streets.
- rbranson 17y ago
  I would argue that the open source software movement fits into the "black market" for purposes of argument. In many cases open source software is superior to commercial software. There are other ways commercial software competes, and they've tried to outlaw it in a roundabout way thru patent litigation, but in reality, they've just had to face the music.
pyre 17y ago
> Unfortunately in digital age, a consumer can get the product by illegal means even if they can't afford it and producer doesn't really have a way to stop this illegal behavior. That may be. But if the consumer consumes the product without paying because they couldn't afford it in the first place, can you really say that you lost money on that? If they didn't have the money to buy it in the first place, how could they have given you money for it if piracy wasn't an option? The real cause of piracy (other than availability) is the over-saturation of media markets that we have. Example: If I want to buy a new video game for $60, that's maybe 4 or 5 CDs that I can't buy, so I download those CDs instead. I know that some people will call it naive, but we live in a society where we are bombarded by marketing in which everyone tries to shout the loudest or find the best way to subtly convince you that you need their product (i.e. you won't be cool unless you have X). But we are now in a marketplace where the consumer can choose to pay for X and pirate Y instead of just deciding to (exclusively) buy X or Y. So it comes down to this: If everyone is able to convince me that their product is a necessity, then I'll end up acquiring all of those products, but only some of them will be paid for. Note: I'm using a hypothetical 'me/I' in this explantion.
- Groxx 17y ago
  There's also the "try before you buy" argument, where those who pirate typically don't keep what they nab. If you pirate something that you end up disliking, and would never have bought it without knowing if it's worth it (so, wouldn't have), there's definitely no loss to the publisher. Besides. As many companies who have dropped DRM have found, many pirates are simply waiting for an unencumbered form of what they want. If the only legitimate porsche seller is selling half-crushed cars, and there's a perfect-quality one sitting next door with the keys in the ignition and a sign that says "free to a good home", is it even ethical to buy the crap one? (that said, all "would you steal a porsche" arguments are straw man arguments anyway)
  - mtoledo 17y ago
    There's still plenty of options to "try before you buy" in the legal market. If its a game, you can rent it, or borrow it from some friend. In many platforms games will have a demo for you to download before you play. Most magazines and websites will have reviews, maybe even video ones, about that game. Most movies have a trailer you can watch before watching the movie, ebooks have sample chapters, etc.
thasmin 17y ago
That the producer doesn't have a way to stop the piracy is the crux of the issue. Because the black market exists, consumers have the power to place their own value on a product. This value is the price that they would pay for the product if it were legally available at that price. The product's price is relative to the marginal cost of production because that's the cost on the black market. The producer is competing with the black market.
- solutionyogi 17y ago
  I don't think you can compare black market with piracy. In black market, you do not get product for free. In fact, most of the time, you may through your nose for the product e.g. drugs/organs. Show me an example where black market sells product at price which equals to marginal cost of production.
  - rbanffy 17y ago
    Software pirates selling their stuff on the street? One can get a copy of the Windows 7 Ultimate (or whatever it's called) for about US$5 a 10 minute walk from my house. It's still a black market, despite it being active during working hours, 6 days a week.
deleted 17y ago
[deleted]
rms 17y ago
Piracy is not a market correction. It is a superior product. What.cd and waffles.fm, with their depth of product and usability, make iTunes and Amazon music seem like a joke. The music hydra does not just have every album, it has most versions of every album. When what.cd and waffles.fm are shut down, they will be replaced by four sites, possibly more. For example, for The Beatles album Let It Be, the following editions are available, as high-quality MP3s and FLAC (currently just FLAC for the vinyl rips, which is fine): 24 bit lossless vinyl rip of the 1970 Apple record. 24 bit lossless rip of 1982 Japanese vinyl. 1987 Parlophone CD. 2004 Apple vinyl rip (16 bit lossless, alas). 2007 Purple Chick Remaster. 2007 Dr. Ebbetts Remaster. 2008 Dr. Ebbetts Remaster. 2009 Apple Remaster. When the music industry can offer a product superior to piracy, they will stand a chance. When the marginal cost of production falls to zero, classical economics ceases to function and extra-market restrictions are needed to force the continued existence of the market.
- mtoledo 17y ago
  In my mind, justifying piracy just because their products are superior is like justifying theft just because the commercial versions are crippled. Besides, piracy is observed in other industries where there's no such difference (games, books), so I don't think that's the driving force.
  - ewjordan 17y ago
    Nobody's saying piracy is right. Just that it's a natural, predictable occurrence that will be part of any digital economy, and that any realistic theory of markets needs to account for it. Most Econ 101 treatments assume full compliance with laws, which in this case is an absolutely devastating assumption, because supply and demand don't tell us much at all when copying is as easy and anonymous as it is. The problem: economically, in many (most?) cases piracy is the rational choice. If I want a product that is sold for $20, but it's available for free (illegally) as a torrent, then I have to weigh the $20 savings vs. the risk of being caught and the financial penalty if caught. Since the risk of being caught is extremely small, well under 1% (practically zero in some cases), even a several thousand dollar fine is not enough to tip the scales in favor of purchase. ...until we consider morals, which in a sense can be considered to have financial value. To some people, the desire to "do right" is worth a lot, enough to make piracy "cost" more than the purchase. But for many more, the moral value of paying for a game/CD/movie/etc legitimately does not balance out the gain they would receive by pirating. These decisions depend on the particulars, obviously - if you like the artist, you'll assign a higher moral value to paying them, and if you hate a company, you're not going to give a second thought to pirating their software. Put another way: do you feel $9 worth of bad when you pirate a $10 CD? If not, then you are making the wrong decision when you pay for it. The original claim is correct, but in a roundabout way: piracy is (at least in part) a result of the fact that prices are higher than the moral cost that people suffer when they pirate them, and it should be exerting a downward price pressure to normalize the two factors (actually, it should be applying a downward pressure only until an optimal point - there are many subtleties involved in figuring that point out, and I'm not actually sure that we're too far off from it, but I'll leave speculation about that for another rant...). Groups like the RIAA have tried to respond by raising the cost of piracy instead of lowering the cost of purchase (these costs include things like inconvenience, payment hassles, etc). It seems unlikely that they will be able to push the average cost to a pirate high enough, though, unless they can massively increase the enforcement rate, which is rather unlikely. So we're stuck in a bit of a market stalemate. The upside (depending on your POV) of which is that it's pretty much a no-brainer for a lot of people to pirate a lot of stuff, and they're getting loads of value for very little cost. Edit: Yes, I am suggesting that instead of price approaching marginal cost ($0), it should be approaching the less tangible "I'm a bad person" moral cost that people incur when they don't pay for something, plus the inconvenience cost of pirating, both of which are usually (but not always) nonzero. Note the difference between this and donation systems: the crucial difference is that the "I'm a good person" value that people get by donating to an artist is not equal to the moral value they lose by pirating, which is typically higher. I suspect it is better to charge for something, even if you know and accept that some people will pirate it, than to give it away for free and solicit donations.
dkersten 17y ago
According to his logic, an audio cd should cost less than a dollar. Yes, this is exactly what pro-piracy people are saying. They are saying that content has always been free and the medium is whats being charged for, hence you sell papers instead of news stories, CDs instead of music tracks etc etc. The problem is that its often easier (certainly easier on the wallet) to pirate than to buy. Since its so easy, people are going to do it - regardless of what you do - so you need to adapt. Sure, you can rely on laws, but when a majority of the population does something, how can you make it illegal? Eg, even Lily Allen, who is completely anti-piracy, herself "pirated" to get her music out there. She claimed she did it because she didn't realise it was wrong. Well, most people don't! If most people don't realise that piracy is wrong (cause its just sharing, right? and most people are taught from a young age that sharing is the right thing to do), then how can we really make it illegal? Its a tough one. If we did say that piracy is Ok, then business gets very difficult because where do you draw the line? If its fine to pirate music, then its also Ok to pirate movies and games and business software and.. just about anything thats convenient or easy to copy! The general consensus on #startups seems to be that SaaS is the way to beat this, but really, SaaS is just a (currently hard to bypass) form of DRM, when you think about it. I don't know the answer and I'm not trying to guess. Personally, I'm trying a mixture between the conventional business model and adapting to the fact that if my software is popular, it will be pirated - I need to ensure that between legit sales and alternative revenue streams, I make enough to be able to ignore the piracy..
- ErrantX 17y ago
  > They are saying that content has always been free and the medium is whats being charged for, hence you sell papers instead of news stories, CDs instead of music tracks etc etc. That's only entirely true in a market where, using your example, the quality and content of news articles are identical. People usually choose to purchase a paper based on the type of content inside; they might be paying more than the content is worth because of the media - but that is a slightly different point.
  - dkersten 17y ago
    Well, the content is used to drive the sales of the medium. so, if you have better quality content, then people buy that medium instead. If this really makes sense or not I can't say. I believe PG has an article on the matter, though he seems to argue that this is, indeed, the case.
tybris 17y ago
Cooks make food. Musicians make music. Just because you can't record food on a CD doesn't mean musicians are special and should make millions without working for it. The only ones I'm the slightest bit worried about are writers.
- netcan 17y ago
  How much should writers make?
- rbanffy 17y ago
  "you can't record food on a CD" At least not yet ;-)
radu_floricica 17y ago
It's roundabout, but it still applies. The main argument is that in a market economy, prices stabilize close to costs because competition exists. In this particular market, this cannot happen because each product is unique and gives monopoly to its owner. But this is not written in stone. Imagine an alternate model where artists still own full IP rights, including on non-commercial use, but use an open process to distribute their music. A free for all in distribution. Or a model in which artists only make money in commercial distribution. Pirate Bay would have to pay, but downloaders not. Or any model in which the artists can be compensated in two different ways. For example the classic way, and a way for listeners to subscribe to "unlimited mp3" plans. Of course, if both distribution channels go trough the same media companies, like I think they do now with online music purchases, there is no real competition to drive the prices down. The crux of the matter is that the bottleneck is not at the artists, but one step down. Remove that, and lots of alternate models involving real competition can appear.

randallsquared 17y ago

According to his logic, an audio cd should cost less than a dollar. While I don't agree with the original post, this is not an argument against it. Unfortunately in digital age, a consumer can get the product by illegal means even if they can't afford it and producer doesn't really have a way to stop this illegal behavior. I agree, except I would say "fortunately". Monopolists should not have a legal right to their market, even if the market (for Metallica songs, for example) didn't exist before they began selling in it.

cellis 17y ago
"Should" and "should not" are normative statements, and have no place in economic discussion.
- dantheman 17y ago
  Copyright is not a real right, it was created to encourage innovation and production. Hence, whenever dealing with copyright should and should not have a place.
  - deleted 17y ago
    [deleted]
  - cellis 17y ago
    Insofar as a country says "copyright" is a law, it is a real right. But that isn't what i'm saying. I'm saying that making statements based on moral judgement based on economics is wrong.
    - dkersten 17y ago
      Sure - but - copyright was created (for the same reasons as patents) to drive innovation. To motivate people to put time and effort into creating something. When it fails to do this, then it should not be a real thing anymore. Now, I'm not saying that copyright doesn't do what its meant to (patents are another story however...) and I'm not arguing that copyright should be eliminated.
- randallsquared 17y ago
  When I say "should" in this context, I'm expressing my preference about laws, not making any kind of statement about an objective morality.
albertsun 17y ago
Why should Metallica not have the legal right to monopolize the market for Metallica songs?
- cellis 17y ago
  http://en.wikipedia.org/wiki/Normative_statement http://en.wikipedia.org/wiki/Normative_statement There is no way to prove this right or wrong. It is just a bad statement to make in the context of economics.
  - albertsun 17y ago
    On the contrary, there are several different ways to interpret "should" and much of economic literature is focused on making those interpretations. For example, is a given policy economically efficient? social welfare maximizing? from a firm's perspective, profit maximizing? or more generally, does it lead to a society that you would want to live in?
solutionyogi 17y ago
I am not sure why the audio cd analogy doesn't hold. Quoting the original post: "Software ISN'T a t-shirt. A t-shirt needs cotton. That cotton must be dyed, woven, sewn, printed, packaged, shipped. Software ISN'T a meal. A meal has ingredients, and the more you spend on them, the better, and that goes double for your chef's salary. People understand where their money is going. People are just fine with paying through the nose when they get their money's worth. But no one likes to feel like they have been taken to the cleaners." Looking up on Google, I can get 500 audio cds for around 185$ (http://www.google.com/search?hl=en&source=hp&q=audio+cd+manufacturing+cost&aq=f&aql=&aqi=&oq= http://www.google.com/search?hl=en&source=hp&q=audio...), per CD cost is 37 cents. Do you think that I should be able to buy the latest album of Backstreet Boys for 37 cents? Where do you account for thousands of dollars spent on recording the album? What about paying the artists? ....you know the 'fixed costs'. We still happily pay 9$ for an audio cd because it gives us pleasure which is worth more than 9$. As he says, 'getting money's worth'. Tell me again, how is software any different? You buy the software ONLY IF you think software gives you more value than it costs you to acquire it.
- randallsquared 17y ago
  I didn't say the analogy didn't hold, but that if it held, it didn't mean the argument was wrong. Separately, I do think the argument is wrong, because it's based on the labor theory of value, which has been shown wrong.
- doronba 17y ago
  What about long dead artists? what about recordings done many years ago, where the covering of recording prices has long been achieved Software, like most intellectual property is a Non-rivalrous good. Nothing in software design prevents simultaneous consumption, indeed, we would not have any website if that was the case. A T-shirt or a Meal is a Rivalrous good, my consumption of the meal prevents your ability to eat it. The law affords protection to non rival goods be enacting author rights, exclusivity for a period of time, copyright etc... historically the limits ware set to release non rival good to the public for its general use. Software companies, entertainment companies etc.. seek to milk those rights to no end, it will be an interesting case to see what an early mandatory release to public domain will have on piracy as a whole
netcan 17y ago
I'm not sure why people come out with these moral axioms whenever piracy comes up. "Monopolists should not have a legal right to their market" Such a big statement with no real way of supporting it any further (the converse is also true). None of the rules around copyright or property ever came about because of any kind of "Natural Law" or moral reasoning. John Locke, be damned. Property rules were created based on existing conventions, or in some cases, created to correspond to defensible borders. You can hum a song or talk about it or play it on your guitar when you get home. You can't sell copies of it? Why? Because printing, pressing & such are (were) possible to regulate with laws. Humming is not.
- randallsquared 17y ago
  I'm not sure why people come out with these moral axioms whenever piracy comes up. It's not a moral axiom; it's an expression of preference. More seriously, any argument for or against it relies on so much shared understanding that it's not clear that there's much use arguing about it at a length of two or three sentences. One sentence is enough to express the conclusion, but a rigorous argument that covered all the major approaches would require a fairly hefty book. Because printing, pressing & such are (were) possible to regulate with laws. Humming is not. That's one approach, but how will you defend your right to hum whatever you want when all of your actions are recorded all the time? Our current technological progress appears to be headed that way, making automatic enforcement of any arbitrary rules possible. In that situation, the question of what the rules should be is more than a question of what sort of rules can be enforced.

bugs 17y ago

You are correct in what you say about producers pricing a product and consumers having a choice. I believe that the real issue here is that consumers now have a moral choice and for many the morality of pirating a cd from a torrent site or even burning it from a friend is not a difficult decision. You will have a hard time finding someone my age or younger (early twenties) who thinks that pirating a cd is equivalent to steeling anything; and building upon that idea many even think torrenting/pirating software and video games is an acceptable thing. I don't know what will happen with music and its distribution but one thing I can say is it probably won't stay the way it is indefinitely.

nfnaaron 17y ago

You're right that producers have the right to price. However, it's not just about price, it's also about being able to get a product in the form and through the channel that a consumer wants. This relates to the current argument about the availability of legal downloads vs pirated downloads. And wait, wait, yes, you're correct, producers have the right to determine product form and channel. :) The way that piracy can work for market correction is that it's information. A product's sales may not be performing as well as a producer would like. Is it because it's too expensive? Or do people just not want it? It could be one, or the other, or both, or other. Piracy, while illegal, is still an indication that yes, people do want the product, and it's desirable enough to break the law to get it. So what can we, the producer, change to convert those pirates and other non-consumers into paying customers? A producer could (doesn't have to) use that extra information to help him think about his product's format, or channel, or price.

anamax 17y ago
> it's also about being able to get a product in the form and through the channel that a consumer wants Why do consumers have the right to their choice of form, channel and price? If the seller is unwilling to provide as the consumer prefers, where does the consumer get the right to force the producer's hand? What's wrong with "if the buyer and seller don't agree on terms, the deal doesn't happen"?
- nfnaaron 17y ago
  "Why do consumers have the right to their choice of form, channel and price?" I'm not saying they have that right, not beyond deciding to buy or not. I'm pointing out that some consumers do try to appropriate that right, and that's one indication of demand.
  - tptacek 17y ago
    It is also an indication of the demand for car stereos when someone cinderblocks my window and rips the stereo out of the dash.
- 17y ago

deleted 17y ago

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nfnaaron 17y ago

"I am surprised that this post reached top of hacker news." I sometimes upvote articles that I disagree with so that they'll live longer, because I want to see more discussion about them. Does anyone else do this?

derwiki 17y ago
That's why I originally voted this up, and why I voted you up. I wanted to see an intelligent HN discussion on the finer points of why this is bullshit.
- mixmax 17y ago
  This is a big problem. You come here for intelligent discussions, and would like to hear intelligent people's take on why a rant is bullshit. What will happen is that over time the intelligent people will leave. The reason there is such an intelligent discussion here is that the submissions are worth discussing - if they degenerate the people that make the intelligent conversation will leave, and you will have Reddit. I read through the article, expecting to find a subtle point, an intelligent analysis or a valid viewpoint. Something to make the article worth my time. When there was none I felt a bit cheated. If this happens enough I will leave.
mixmax 17y ago
Yes, but only articles that have a valid point. I enjoy coming to HN because the linked articles have intellectual value, even if I happen to disagree with them. This one doesn't.

netcan 17y ago

It is bullshit. It's confusing between the economic outcome in a perfectly competitive market, "price drops to marginal costs" with a normative statement "price should drop to marginal costs." Every business article you need. Every way of gaining "competitive advantage" is a strategy for avoiding this outcome. If the moral imperative,price should drop to marginal costs, existed and was enforced, doing business would practically be illegal.

solutionyogi 17y ago
Bingo. You have put it way better than I did!
camccann 17y ago
I think the implied moral imperative is generally taken to be "markets should be freely competitive"; everything else is details. Prices not dropping is just an indicator that a market isn't competitive due to, e.g., barriers to entry or government interference. Of course, not everyone thinks free markets are morally preferable, so it's not really an imperative that applies universally.
- netcan 17y ago
  I see what you're saying, but I don't buy it. I think if you look at the contexts where the normative statement appears , you'll find that it is a genuine mix up, not an indirect criticism of restricted markets. I wouldn't be surprised if criticism of restricted markets is part of where this comes from but it is not a rational path. Even a perfectively free market is not perfectly competitive. Perfectly competitive is a theoretical position used by economics, but it is theoretical. Perfectly competitive means profits are consistently zero, for example. If I have a nicer smile then the girl at the next shop and you prefer to shop at my shop, that's an "obstruction" preventing perfectly competitive markets. The only markets that approach perfect competition in reality are commodity markets where, by definition, all products are perfectly equivalent. This makes it even harder to get from "prices equal marginal costs if markets are perfectly competitive" to "prices prices should equal (or sometimes 'reflect') marginal costs." The implication is not just "remove government enforced barriers to competition" it is also "remove differences between you and competitors" and absurdities like "hire the same person as your competitors." Perfect competition requires perfect substitutes (competitors). Imagine a "product" that uses necessarily non-uniform inputs: a seminar. One has Jimmy Carter speaking. The other has Mohammad Khatami. For this market to be perfectly competitive, the speakers (and the location and the coffee, etc) would have to be exactly equivalent.

camccann 17y ago

Unfortunately in digital age, a consumer can get the product by illegal means even if they can't afford it and producer doesn't really have a way to stop this illegal behavior. What do you mean "in the digital age"? Ever heard the term "black market"? Of course it's a market correction, it just happens to be an extralegal one. The laws of economics don't stop applying, and the market doesn't go away, just because a producer has been granted a government-enforced monopoly; no matter how appealing the notion is, making something illegal doesn't make it magically disappear. I have little doubt that producers could find ways to successfully sell their products anyway, but that would require sucking it up and admitting that they have to compete on actual value, instead of relying on massive government market intervention.

solutionyogi 17y ago
Show me one example of a black market where consumer can get the EXACT same product as available in open market for FREE and if it is as easy as clicking a button on a screen. Forget free, you will be hard pressed to find an example where black market offers a product which costs less. Black markets happen when consumer want something but they can't buy it legally (e.g. drugs, organs etc.)
- aniketh 17y ago
  The currency market in India for exchange rates in the black market till sometime ago gave better rates than legal conversion.
  - nico 17y ago
    It still happens in Cuba: dollar to cuban convertible pesos, it is cheaper on the streets.
rbranson 17y ago
I would argue that the open source software movement fits into the "black market" for purposes of argument. In many cases open source software is superior to commercial software. There are other ways commercial software competes, and they've tried to outlaw it in a roundabout way thru patent litigation, but in reality, they've just had to face the music.

pyre 17y ago

> Unfortunately in digital age, a consumer can get the product by illegal means even if they can't afford it and producer doesn't really have a way to stop this illegal behavior. That may be. But if the consumer consumes the product without paying because they couldn't afford it in the first place, can you really say that you lost money on that? If they didn't have the money to buy it in the first place, how could they have given you money for it if piracy wasn't an option? The real cause of piracy (other than availability) is the over-saturation of media markets that we have. Example: If I want to buy a new video game for $60, that's maybe 4 or 5 CDs that I can't buy, so I download those CDs instead. I know that some people will call it naive, but we live in a society where we are bombarded by marketing in which everyone tries to shout the loudest or find the best way to subtly convince you that you need their product (i.e. you won't be cool unless you have X). But we are now in a marketplace where the consumer can choose to pay for X and pirate Y instead of just deciding to (exclusively) buy X or Y. So it comes down to this: If everyone is able to convince me that their product is a necessity, then I'll end up acquiring all of those products, but only some of them will be paid for. Note: I'm using a hypothetical 'me/I' in this explantion.

Groxx 17y ago
There's also the "try before you buy" argument, where those who pirate typically don't keep what they nab. If you pirate something that you end up disliking, and would never have bought it without knowing if it's worth it (so, wouldn't have), there's definitely no loss to the publisher. Besides. As many companies who have dropped DRM have found, many pirates are simply waiting for an unencumbered form of what they want. If the only legitimate porsche seller is selling half-crushed cars, and there's a perfect-quality one sitting next door with the keys in the ignition and a sign that says "free to a good home", is it even ethical to buy the crap one? (that said, all "would you steal a porsche" arguments are straw man arguments anyway)
- mtoledo 17y ago
  There's still plenty of options to "try before you buy" in the legal market. If its a game, you can rent it, or borrow it from some friend. In many platforms games will have a demo for you to download before you play. Most magazines and websites will have reviews, maybe even video ones, about that game. Most movies have a trailer you can watch before watching the movie, ebooks have sample chapters, etc.

thasmin 17y ago

That the producer doesn't have a way to stop the piracy is the crux of the issue. Because the black market exists, consumers have the power to place their own value on a product. This value is the price that they would pay for the product if it were legally available at that price. The product's price is relative to the marginal cost of production because that's the cost on the black market. The producer is competing with the black market.

solutionyogi 17y ago
I don't think you can compare black market with piracy. In black market, you do not get product for free. In fact, most of the time, you may through your nose for the product e.g. drugs/organs. Show me an example where black market sells product at price which equals to marginal cost of production.
- rbanffy 17y ago
  Software pirates selling their stuff on the street? One can get a copy of the Windows 7 Ultimate (or whatever it's called) for about US$5 a 10 minute walk from my house. It's still a black market, despite it being active during working hours, 6 days a week.

deleted 17y ago

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rms 17y ago

Piracy is not a market correction. It is a superior product. What.cd and waffles.fm, with their depth of product and usability, make iTunes and Amazon music seem like a joke. The music hydra does not just have every album, it has most versions of every album. When what.cd and waffles.fm are shut down, they will be replaced by four sites, possibly more. For example, for The Beatles album Let It Be, the following editions are available, as high-quality MP3s and FLAC (currently just FLAC for the vinyl rips, which is fine): 24 bit lossless vinyl rip of the 1970 Apple record. 24 bit lossless rip of 1982 Japanese vinyl. 1987 Parlophone CD. 2004 Apple vinyl rip (16 bit lossless, alas). 2007 Purple Chick Remaster. 2007 Dr. Ebbetts Remaster. 2008 Dr. Ebbetts Remaster. 2009 Apple Remaster. When the music industry can offer a product superior to piracy, they will stand a chance. When the marginal cost of production falls to zero, classical economics ceases to function and extra-market restrictions are needed to force the continued existence of the market.

mtoledo 17y ago
In my mind, justifying piracy just because their products are superior is like justifying theft just because the commercial versions are crippled. Besides, piracy is observed in other industries where there's no such difference (games, books), so I don't think that's the driving force.
- ewjordan 17y ago
  Nobody's saying piracy is right. Just that it's a natural, predictable occurrence that will be part of any digital economy, and that any realistic theory of markets needs to account for it. Most Econ 101 treatments assume full compliance with laws, which in this case is an absolutely devastating assumption, because supply and demand don't tell us much at all when copying is as easy and anonymous as it is. The problem: economically, in many (most?) cases piracy is the rational choice. If I want a product that is sold for $20, but it's available for free (illegally) as a torrent, then I have to weigh the $20 savings vs. the risk of being caught and the financial penalty if caught. Since the risk of being caught is extremely small, well under 1% (practically zero in some cases), even a several thousand dollar fine is not enough to tip the scales in favor of purchase. ...until we consider morals, which in a sense can be considered to have financial value. To some people, the desire to "do right" is worth a lot, enough to make piracy "cost" more than the purchase. But for many more, the moral value of paying for a game/CD/movie/etc legitimately does not balance out the gain they would receive by pirating. These decisions depend on the particulars, obviously - if you like the artist, you'll assign a higher moral value to paying them, and if you hate a company, you're not going to give a second thought to pirating their software. Put another way: do you feel $9 worth of bad when you pirate a $10 CD? If not, then you are making the wrong decision when you pay for it. The original claim is correct, but in a roundabout way: piracy is (at least in part) a result of the fact that prices are higher than the moral cost that people suffer when they pirate them, and it should be exerting a downward price pressure to normalize the two factors (actually, it should be applying a downward pressure only until an optimal point - there are many subtleties involved in figuring that point out, and I'm not actually sure that we're too far off from it, but I'll leave speculation about that for another rant...). Groups like the RIAA have tried to respond by raising the cost of piracy instead of lowering the cost of purchase (these costs include things like inconvenience, payment hassles, etc). It seems unlikely that they will be able to push the average cost to a pirate high enough, though, unless they can massively increase the enforcement rate, which is rather unlikely. So we're stuck in a bit of a market stalemate. The upside (depending on your POV) of which is that it's pretty much a no-brainer for a lot of people to pirate a lot of stuff, and they're getting loads of value for very little cost. Edit: Yes, I am suggesting that instead of price approaching marginal cost ($0), it should be approaching the less tangible "I'm a bad person" moral cost that people incur when they don't pay for something, plus the inconvenience cost of pirating, both of which are usually (but not always) nonzero. Note the difference between this and donation systems: the crucial difference is that the "I'm a good person" value that people get by donating to an artist is not equal to the moral value they lose by pirating, which is typically higher. I suspect it is better to charge for something, even if you know and accept that some people will pirate it, than to give it away for free and solicit donations.

dkersten 17y ago

According to his logic, an audio cd should cost less than a dollar. Yes, this is exactly what pro-piracy people are saying. They are saying that content has always been free and the medium is whats being charged for, hence you sell papers instead of news stories, CDs instead of music tracks etc etc. The problem is that its often easier (certainly easier on the wallet) to pirate than to buy. Since its so easy, people are going to do it - regardless of what you do - so you need to adapt. Sure, you can rely on laws, but when a majority of the population does something, how can you make it illegal? Eg, even Lily Allen, who is completely anti-piracy, herself "pirated" to get her music out there. She claimed she did it because she didn't realise it was wrong. Well, most people don't! If most people don't realise that piracy is wrong (cause its just sharing, right? and most people are taught from a young age that sharing is the right thing to do), then how can we really make it illegal? Its a tough one. If we did say that piracy is Ok, then business gets very difficult because where do you draw the line? If its fine to pirate music, then its also Ok to pirate movies and games and business software and.. just about anything thats convenient or easy to copy! The general consensus on #startups seems to be that SaaS is the way to beat this, but really, SaaS is just a (currently hard to bypass) form of DRM, when you think about it. I don't know the answer and I'm not trying to guess. Personally, I'm trying a mixture between the conventional business model and adapting to the fact that if my software is popular, it will be pirated - I need to ensure that between legit sales and alternative revenue streams, I make enough to be able to ignore the piracy..

ErrantX 17y ago
> They are saying that content has always been free and the medium is whats being charged for, hence you sell papers instead of news stories, CDs instead of music tracks etc etc. That's only entirely true in a market where, using your example, the quality and content of news articles are identical. People usually choose to purchase a paper based on the type of content inside; they might be paying more than the content is worth because of the media - but that is a slightly different point.
- dkersten 17y ago
  Well, the content is used to drive the sales of the medium. so, if you have better quality content, then people buy that medium instead. If this really makes sense or not I can't say. I believe PG has an article on the matter, though he seems to argue that this is, indeed, the case.

tybris 17y ago

Cooks make food. Musicians make music. Just because you can't record food on a CD doesn't mean musicians are special and should make millions without working for it. The only ones I'm the slightest bit worried about are writers.

netcan 17y ago
How much should writers make?
rbanffy 17y ago
"you can't record food on a CD" At least not yet ;-)

radu_floricica 17y ago

It's roundabout, but it still applies. The main argument is that in a market economy, prices stabilize close to costs because competition exists. In this particular market, this cannot happen because each product is unique and gives monopoly to its owner. But this is not written in stone. Imagine an alternate model where artists still own full IP rights, including on non-commercial use, but use an open process to distribute their music. A free for all in distribution. Or a model in which artists only make money in commercial distribution. Pirate Bay would have to pay, but downloaders not. Or any model in which the artists can be compensated in two different ways. For example the classic way, and a way for listeners to subscribe to "unlimited mp3" plans. Of course, if both distribution channels go trough the same media companies, like I think they do now with online music purchases, there is no real competition to drive the prices down. The crux of the matter is that the bottleneck is not at the artists, but one step down. Remove that, and lots of alternate models involving real competition can appear.