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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.