Comments on: Efficient Distribution http://madisonian.net/2006/09/04/efficient-distribution/ a blog about law, tech, culture, and related things Sat, 11 Feb 2012 02:59:42 -0600 http://wordpress.org/?v=2.8.4 hourly 1 By: Frank Pasquale http://madisonian.net/2006/09/04/efficient-distribution/comment-page-1/#comment-73759 Frank Pasquale Mon, 04 Sep 2006 16:59:47 +0000 http://madisonian.net/archives/2006/09/04/efficient-distribution/#comment-73759 This strikes me as absolutely right. But your analysis may hinge on your ability to decouple the measurement of efficiency from "ability to pay" metrics. For example, consider the following series of hypotheticals: 1) A singer sells a recording of a song to a radio station for $50, and permits the station to permit listeners to download it for free. 50,000 listeners do so. 2) A firm pays a million dollars to the singer so its 100 employees can be given recordings of this "exclusive performance;" DRM prevents any from recording or even sharing the recording. Which outcome is more efficient? On a standard economic analysis, clearly 2): it generates $999,950 more revenue. Even if we assume each listener in 1) pays $1 apiece, it isn't even close. And even if we accept the models developed in <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=584682" rel="nofollow">my piece</a> in YJOLT comparing widespread distribution to environmental preservation (i.e., we measure the long-term propensity of free recordings to drive willingness to pay for or otherwise support that or other artists), we probably can't get numbers that move 1) close to 2). Larry Tribe has some piece in Constitutional Choices on allocative vs. distributive efficiency....i'll look for that. I think one promising step toward a more realistic analysis of efficiency would be recognizing the declining marginal utility of money. But that's another post! This strikes me as absolutely right. But your analysis may hinge on your ability to decouple the measurement of efficiency from “ability to pay” metrics. For example, consider the following series of hypotheticals:

1) A singer sells a recording of a song to a radio station for $50, and permits the station to permit listeners to download it for free. 50,000 listeners do so.

2) A firm pays a million dollars to the singer so its 100 employees can be given recordings of this “exclusive performance;” DRM prevents any from recording or even sharing the recording.

Which outcome is more efficient? On a standard economic analysis, clearly 2): it generates $999,950 more revenue. Even if we assume each listener in 1) pays $1 apiece, it isn’t even close. And even if we accept the models developed in my piece in YJOLT comparing widespread distribution to environmental preservation (i.e., we measure the long-term propensity of free recordings to drive willingness to pay for or otherwise support that or other artists), we probably can’t get numbers that move 1) close to 2).

Larry Tribe has some piece in Constitutional Choices on allocative vs. distributive efficiency….i’ll look for that.

I think one promising step toward a more realistic analysis of efficiency would be recognizing the declining marginal utility of money. But that’s another post!

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