Economic and Game Theory
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|"Monopoly corrupts, absolute monopoly corrupts absolutely."|
The beauty of quantum mechanics is that it assures us that if we crash our car into a telephone pole there is a positive probability we and our automobile will be reassembled intact back in the middle of the road. The beauty of lawyers is that by obfuscating such a true but useless fact with irrelevant arguments, they can make it seem like it might be a good idea to crash cars into telephone poles. Posner's response to our letter and essay, basically a reiteration of what he and Landes say in their book, is a case in point.
First the "logical argument." There could be externalities either positive (I want to read the same book as everyone else) or negative (I want to be the only one to own the book). But are monopolies the solution to externalities? Where on earth did Posner get such an improbable implication? Should we give a monopoly over cars to Ford to reduce negative externalities from gas emission? So, raising the issue of externalities is obfuscation in and by itself, as nothing relevant follows from it. Obfuscation does not end here. The case of positive externalities is also obfuscation - if externalities are positive the market will underprovide, and a monopoly, by providing even less will be even worse. It is true (on pure logical grounds) that the positive externality could be so strong that demand is actually upward sloping. But in the likely case of more or less constant marginal cost, this would destabilize the competitive equilibrium, cause output to rise until demand does decline, and lead to a new competitive equilibrium where - yes - competition does better than monopoly. There is the logical possibility that demand could be upward sloping, yet marginal cost even more so - but we recommend you do not crash your car into that telephone pole. And we are willing to bet that this contorted case was not what Posner had in mind.
Then there is the relevant argument that externalities could be negative, in which case competitive equilibrium will overprovide, and - possibly - monopoly by producing less would be better. Notice that, should you accept this logic, you should also insist that some car maker is given monopoly over automobiles. But let us move on. Here it is the assumption that obfuscates reality: while it might make sense for Ferrari's or Monet's originals - it seems unlikely that for Mickey Mouse many people will suffer a loss because others are consuming more of it. And in many ways this is the heart of the matter - Posner's obvious hostility to mass culture. True, mass culture probably has a negative impact on a few who might have exclusively had sole access to good things - such as rapid transportation, good food, and plenty of entertainment. But we think it is a good thing that these are now widely available. Morever, the mass market has left plenty of room for the wealthy to pursue exclusive pursuits - the purchase of a famous home run baseball, or other exclusive item - so the fact that many may now enjoy good music probably has not been a great loss to the cognoscenti.
Finally, the irrelevant fact: as evidence for the importance of externalities Landes and Posner constantly refer to the fact that monopolists are very aware of the fact that by increasing output they will lower price. But of course this is true whether or not there are externalities, so as we repeatedly have pointed out, is evidence for exactly nothing.
But why stop with irrelevant facts? The fashion industry has the same combination of demand for uniqueness and sameness as the market for books, music or movies. But it has managed to operate and innovate without the benefit of government intervention. So for the very wealthy - they buy the unique pieces from the big labels; and for the not so wealthy - they buy the identical imitation, without the brand, three months later. As long as trademarks allow firms to identify themselves - and in this we agree with Posner that they should - there will be room in the market for those of truly high taste who prefer the scarce to the common.
Boldrin, M. and D. K. Levine : "Why Mickey Mouse is Not Subject to Congestion: A Letter on 'Eldred and Fair Use'", The Economists' Voice, 1:2.
Britt, B. : "International Marketing: Disney's Global Goals," Marketing.
Karjala, D. S. : "Statement of Copyright and Intellectual Law Professors in Opposition to H.R. 604, H.R. 2589 and S. 505, The Copyright Term Extension Act, Submitted to the Joint Committees of the Judiciary."
Karjala, D. S. : "Opposing Copyright Extension."
Landes, W. M. and R. A. Posner : The Economic Structure of Intellectual Property Law, Harvard University Press
Lemley, M. A. : "Ex Ante versus Ex Post Justifications for Intellectual Property," UC Berkeley
Lindsey, B. : Against the Dead Hand: The Uncertain Struggle for Global Capitalism, Wiley
Posner, R. A. : "Posner responds to "Why Mickey Mouse is Not Subject to Congestion," by Michele Boldrin and David Levine", The Economists' Voice, 1: 2.
Seabright, P. : The Company of Strangers: A Natural History of Economic Life, Princeton University Press