Information Overload Externalities

Frank Pasquale has posted “The Law and Economics of Information Overload Externalities” to SSRN. Frank argues that the overabundance of information and increased search costs give rise to information overload externalities that copyright law ought to take into account. How? Well, by recognizing that information “categorizers,” such as Google, provide a useful social function that benefits copyright owners and consumers. Categorizers are not free riding on the copyright owners’ investments; to the contrary, they are providing a service for the copyright owners and consumers alike by reducing the transaction costs associated with wading through the (polluted or congested) information environment.

Put another way, categorizers confer positive external benefits (spillovers) on copyright owners and consumers. (Paul Ganley has a nice paper on this.) Whichever perspective we take to view the flow of benefits/costs, the conclusion remains the same: there is no compelling reason to fully internalize the externalities. It may be best to simply let the spillovers flow in this context.

If one takes the perspective that information overload externalities are negative externalities akin to pollution of the environment (i.e., pollution of the information environment), then internalization could be accomplished via taxation, regulation, property rights, and so on; we might go so far as to say that information polluters (which is every information provider, I suppose) should be forced to pay–the government (e.g., tax) or categorizers (e.g., license fees). If on the other hand, we view search functionality as confering positive externalities, we similarly might aim to internalize the externalities perhaps by confering property rights on categorizers (would all information providers be free riders then?). These perspectives seem so far fetched, although they really shouldn’t be, which is one nice contribution that flows from Frank’s paper and his use of environmental metaphors to frame the context and interactions. But, in the end, I think the lesson may be that internalization through any of these means appears to be unnecessary. Categorizers have sufficient incentives to invest in search and other categorizing technologies and business models. While copyright owners may argue that categorizers are harming rather than helping them, the alleged harms tend to be derived from either the inability to control the categorization market (which is not a “potential market” within the grasp/reach of copyright) or the competition (for content) that results when consumers have access to better means for navigating the information environment.

3 thoughts on “Information Overload Externalities

  1. Thanks for commenting on the paper! I think there are some very difficult questions raised by the extent of derivative works rights–especially if fragments of texts end up getting as copyrightable as fragments of songs.

    The key question is whether we want the categorizers to be independent of the owners of the content they categorize. I need to think about this in terms of parallels in the physical world. For example, is there some principle to justify separate ownership of the “pipes” and “what’s in the pipes”?

    There seems to be a big trend toward convergence–for example, the Sony that fought for fair use in 1984 now installs “rootkit” and other DRM goodies in order to maintain control over content. The RBOCs recent call for a net “tax” on traffic is meant, in part, to drive people to their own sites. (i.e., Comcast won’t charge for hits to its “Fan” of content, but may charge other providers if you want to go to their site).

    I think this convergence is troublesome–that the increasing economies of scale will generate very powerful “cable/phoneline/satellite/content-owning” conglomerates. Guy PEssach, in his piece on Copyright’s Diversity Externalities, warns about this very well.

    So hopefully, copyright fair use can loosen up a bit to make this type of business strategy less profitable.

  2. By the way, I really like your point on reversing the licensing here–i.e., requiring content owners to pay categorizers, as opposed to vice versa. here’s a bit of my piece in Case Western that raises similar concerns:

    Countering arguments that would later prevail in the case of digital audio tape (“DAT”) technology, Stan Liebowitz argued that the case of Sony’s “appropriation” of the value of televised content was no different than that of other situations where an ostensibly parasitic product actually established a symbiotic relationship:

    VCR manufacturers earn revenues selling a product which would, for practical purposes, have little value if not for the existence of copyrighted intellectual products. Notice, however, that an identical argument can be made for the producers of television sets, TV guides, antennae, Neilsen ratings, TV stands, etc.. All these products are strong complements with television programming and are “exploiting” the televi-sion market to earn revenues. Should they all pay a portion of their revenues to copyright owners (as cable television own-ers now do for retransmission of over-the-air
    broadcasts)? . . . Perhaps copyright owners should pay part of their revenues to the manufacturers of these complementary products?

    Seen in this light, the content providers appear like the avaricious candle-sellers of Bastiat’s parody, who petition the government to block the sun in order to increase their sales. They are trying to leverage public concern about the classic “free-rider” problem of in-tellectual property production into control over the value of all posi-tive externalities arising from their products.

    and of course that leads us to Lemley’s very nice article on free riding in Tex. L. Rev.

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