Re: "copying isn't stealing": If a producer prices someone out of the market, he/she is no longer a potential customer. That's a business decision about market size made by the producer - they get higher profits at a higher price point and smaller market. Great!
However, producers don't get to complain about piracy by people who aren't in their market. Unless they eventually put the product on sale at some point, a pirate has no impact on the bottom line. In the simple (one-price-forever) case, the producer lost nothing - not even potential profit, because the consumer was already priced out.
Say an Hermes handbag costs $1,000 to make. This is something you can afford. But it sells for $10,000. You can't afford this, so you'd never be in the market. By your reasoning, it should be okay for you to walk into an Hermes, grab a bag, and leave $1,000 on the counter, and walk out. Hermes shouldn't get to complain, right, because they're in exactly the same financial position they were in before. It has no impact on their bottom line to lose a sale to a customer who wouldn't have bought the product anyway, right?
This is a bad example because the value of the Hermes handbag (to buyers and therefore to Hermes) comes partly from its rarity (a positional good http://en.wikipedia.org/wiki/Positional_good).
A better example would be a Honda car (or Ford, or whoever makes boring cars these days). Say you go to the factory, provide the raw materials and pay the workers to do one extra car which you then drive off in. And suppose otherwise you wouldn't have bothered buying a car at all.
Yes! They absolutely have something to complain about!
You now have lowered the impression of price of the good to everyone who knows what you did. Now when your friend wants to buy a car, why would they buy one from Ford when they know they can just go down to the factory with the raw materials and a little cash and get the same car for less. Ford should be PISSED!
Yup, it's a bad example for the reason you mention.
Putting that aside though, once you're out of positional good territory some providers of goods and services are indeed willing to accept different prices from different customers depending on their capacity to pay.
If I can make 10% profit out of you by charging a lower price whilst still being able to make %200 profit from the next client through the door because they can pay more, then it is rational for me to do so. The trick is that it is difficult to convince rich client A to pay twice as much as poor client B if A knows that B is getting the same good for half the price, but if you can pull that trick off, then it is totally rational to modify the selling price based on the customer's capacity to pay.
You can get a loan, buy the handbag for $10000, and disassemble it to create a copy pattern. Then you make and sell 10 copies at $2000 to pay off your loan, and sell an 11th copy to pay for the 12th, that you keep for yourself. At that point, you can continue making copies to serve all the customers that Hermes is excluding by setting its price so high, and profit from their narrow market focus. But you can't put a Hermes logo on your copies. Trademark.
This happens all the time, because fashion has no copyrights.
Copying isn't stealing. Stealing is stealing. You can't be a fashion monopolist, because there are trivial barriers to entry and no legal protections. Therefore, in order to price higher than the marginal cost of production, you have to sell the protected monopoly good--your trademark.
Hermes can charge $10000 for a $1000 item because it has created $9000 worth of brand value in its trademark. So, theoretically, it should be value-neutral for you to take the Hermes bag and leave $1000 on the counter, provided that you also remove and leave behind every trademarked element on the item. That's the only way Hermes breaks even. And the only way you can do this non-hypothetically without it being considered theft is by purchasing a knock-off bag for $1000 instead.
The bags are made out of something physical, a depletable resource. And put together by labor that is also finite (there are only so many low-wage Indian and Bengali workers to put these things together). So, while a seductively attractive situation to analogize with, I don't think it's a technically good one all the way through.
(though fwiw, I should mention I'm okay with people stealing Hermes or louisvitton bags)
Leather and labor are both more scarce than electricity, bandwidth, and storage (but all are finite), but that is priced into the cost of replacement. If you refund the producer the cost of replacement, whether it's $1,000 or $0.01, they are still in the same financial position they were before you took the product.
I remember having a conversation with you about how uneven access to opportunity is in America among different races, economic classes, etc. - and I recall you saying in a resigned way (something like) "Oh welp, yeah things are bad, but I have a wife and a kid, I'm too tired and old to do anything about that, and I'm not an idealist anymore." I have somewhat the same feelings about piracy... it's not going to stop, it's just the way people get their software. Frankly I hate that this is the way things are, because now we have total pieces of shits like Facebook -- free things, which are not really free -- they're taking our fucking data, and invading our privacy, I hate that, I wish developers of good software made a killing. But there are a lot of poor people right now who're not doing really well... and you know what, if they can spend 2 hours watching a pirated movie to lessen their miseries, I say God bless them. There are bigger things we should be directing our outrage at. When there are no more wars, no more poor people, no more crimes, let's worry about piracy. (And, also, unlike the uneven access to opportunity thing -- at least (generally) the people getting fucked in this case are the already rich ones.)
To be fair, I don't think piracy is a big deal in the grand scheme of things. I personally think copyright holders should have an absolute property right in what they create, but at the same time, I think infringement is like trespass. Yeah, the kid cutting across your lawn is an infringement of your property right, but it's not a big deal and you'll never be able to do anything about it.
My ire is directed at the people who treat piracy as some sort of moral high ground that they're taking.
The purpose of analogies is to explore an unfamiliar hypothetical in the context of a familiar situation. We can't magically copy handbags, so we resort to constructing an analogy that is as close as possible. From the perspective of a handbag producer, who has no use value for the handbag, refunding the cost of replacement is functionally the same as copying the bag so it doesn't require replacement.
But the analogy misses the fundamental difference between replacing a physical object with the cost of creating the object, and copying information. Part of the reason why it's objectionable to replace the bag with $1,000 is that it requires effort and time to replace it with another bag that you could sell for $10,000. That friction is annoying, and frustrating, and slows down the economy.
The other reason is that the store's supplier has a finite number of handbags - and selling one for $1,000 is clearly worse than selling one for $10,000. With data, there's an infinite supplier willing to sell you more at the same marginal cost. In that case, I'm back to not seeing why the store owner would care.
Copying data is frictionless - in fact, it's invisible. The store owner would never even know it happened.
All that means is that in the analogy, you set the "cost of replacement" to factor in the cost of friction. You have an Hermes store factory and the $1,000 covers not just the cost of raw materials for the bag, but the labor to produce it, and the cost attributable to not having another item until the next shipment.
This is where your analogy retreats into a kind of magic that distracts from the issue. You magically assume that $1000 compensates the company, the distribution pipeline, and the store for all of the lost opportunity of a missing item. This cost varies depending on how many items there are, what space the item is taking up in the store, where the store is located, the time that the item is being sold, etc. The assumption that this is supposedly all wrapped up in a sum 1/10th of the sticker price, while at the same time trying to use the disparity between that sum and the sticker price as moral leverage for the analogy, makes the analogy seem very dishonest.
There is nothing magic about the process. There is a number that represents the replacement value of the item, and it's computable. I pulled the number $1,000 out of a hat. I don't know what Hermes' profit margin on each item is. I assume its high, in that price >> replacement cost. I use that not as moral leverage for the analogy, but because digital products have a similar situation where price >> replacement cost.
My point is that it's ridiculous to make a categorical distinction between digital and physical goods based on the premise that digital goods have a zero replacement cost while physical goods have a non-zero replacement cost. It makes it seem like as long as a producer is not out the replacement cost, then stealing a product is okay.
I'm not talking about the cost to replace the item. I'm talking about the lost opportunity to sell the item for profit to someone in the target market. You pull $1000 out of a hat, much like a rabbit, but to assume that it factors in the whole opportunity cost of an item that can be sold for ten times that begs the question of the analogy.
Think of it this way. If, during a peak holiday shopping weekend, a thousand people not in the target market descended upon a store and replaced all of the bags with their strict cost-to-eventually-replace amount, this would be a major blow to the company's expected revenue. The same scenario does not hold for digital products. A thousand people could pirate the digital product, and as long as the pirates are not in the target market (an assumption made in these analogies so far), there is no analogous loss of potential revenue.
That's temporarily one less handbag that could be sold for profit to someone in the target market.
I think the 'magic' analogy is still a bit more apt because of the difficulty of quantifying that temporary lost opportunity. Maybe it could be about using your own 3D printer to duplicate a product exactly.
Even if one could copy a physical item, which likely be a possibility at some point in the future, it's still a form of stealing. I don't know how you feel about it but his reasoning is wrong.
What makes you think pirates are priced out of the market? If we're talking about, say, the U.S., your typical pirate doesn't seem to be "priced out of the market" for a variety of other leisure goods, like the electronics that they're using to pirate music and TV shows.
The difference is that they don't have a frictionless way of "pirating" electronics, so they are actually forced to choose between paying for the good and abstaining from it. With media, it's easy to rationalize that you wouldn't be giving the producer money anyway, but I'm skeptical of your ability to honestly evaluate that when you have the option to trivially enjoy the good for free.
However, there is an incredible amount of content out there available via free and legal means. That is to say - technology has made the barrier to entry very, very low and so content creation is a really competitive market. The relevant question is not whether, strictly speaking, the pirate can afford the product - I can afford an Hermes bag if I save up for a while - but whether their willingness to pay exceeds the price. I'm priced out of the market based on my willingness to pay, not my ability to pay.
That's a good clarification, and I agree that willingness to pay is the relevant metric to use when talking about being priced out of the market. The same point applies, though; it's hard to honestly assess your willingness to pay when it takes you 5 clicks and a few minutes of waiting to get exactly what you want for $0.
If we were to take a typical pirate and transport them to a hypothetical world where piracy was physically impossible, I think you'd generally find that they're not actually priced out of the market for many of the goods that they currently pirate. They'd likely cut down their consumption in a major way, but I strongly suspect that they'd still be willing to pay for a significant portion of the goods they currently pirate.
> If we were to take a typical pirate and transport them to a hypothetical world where piracy was physically impossible, I think you'd generally find that they're not actually priced out of the market for many of the goods that they currently pirate. They'd likely cut down their consumption in a major way, but I strongly suspect that they'd still be willing to pay for a significant portion of the goods they currently pirate.
I really doubt that.
First your last sentence. Which one is it? Either you cut down on consumption in a major way, or you still pay for a significant portion of your current consumption.
Then, questions about this hypothetical world. Does free music (net.labels, ektoplazm.com etc) still exist in this world? If not then I'd expect music culture to become a rather elitist hobby, if it even still exists in any meaningful form at all.
If free music still exists then I expect it to flourish much more than it does in the real world. I'd probably mostly listen to that, because that's where the innovation will happen. I'd probably buy a tiny number of some classic genre-definers that happened to end up on the "paid" side of the fence.
The latter situation is where we're moving with piracy as well.
It's really easy to "honestly" assess willingness to pay, actually.
If you paid for it, you were willing to pay at least the asked amount. In a "pay what you want" scheme, your willingness to pay is something between infinity and what you wind up paying. If you don't buy a thing, your willingness to pay is something below the price being asked.
There's no magic. It's an immediately available revealed-preference system - you either pay or you don't. I won't disagree that the availability of a free, well-functioning, DRM-free, easily available alternative reduces people's willingness to pay for locked-in, degraded, or even available-but-overpriced alternatives. That said, we live in a world where the piracy alternative exists, whether people like it or not.
Adjust your business model accordingly. Valve is making a killing selling software via Steam.
Sure, easy piracy is a part of reality and businesses should, as a pragmatic matter, adjust their business models -- that's neither here nor there.
When I talk about being able to honestly assess willingness to pay, I'm talking about the pirate who claims that they wouldn't buy a good anyway so they might as well pirate it. It might be true, but all we can really say from the outside is that they value the good at least $0 worth, so their willingness to pay is somewhere between 0 and infinity. You can't put an upper bound on their willingness to pay just because they didn't buy the good when they got the good for free.
I don't particularly care if people pirate, but I find that pirates tend to do a fair bit of mental gymnastics trying to justify why piracy is ethical; I think the "I wouldn't pay for it anyway" argument falls under that umbrella.
If my $1,000 were to magically, instantly transform into an identical Hermes bag sitting on the counter, I'm not sure how they'd ever even know it happened.
Who was harmed?
Fashion is a little different, too. There's very little software that operates in a world where exclusivity is an important aspect of pricing - Hermes bags cost $10,000 because people like to signal that they can afford a $10,000 bag. The value is very quickly diluted with greater availability. I can't think of a digital product that operates that way - maybe niche data re-selling? Certainly not TV shows or movies or songs.
Yes; signaling seems to be an important part of value for the producers, not only in fashion. It's the same in expensive cars, expensive electronics (think Apple), etc. Not surprisingly, those are the companies that are the loudest about chinese knockoffs.
If I were to 3D scan and then replicate the bag with subatomic precision using Star Trek replicator, I don't think anyone would feel that I'm stealing something, but people would still point out that this is not a real Hermes bag (so I got something of lesser worth). And if I took the original and left the copy in the shop, it could be considered theft even though you couldn't tell a difference with a scanning electron microscope.
It's funny how society and moral intuitions work; a very interesting topic.
It wouldn't be stealing. It would be trademark infringement. You would have to adjust your replicator to remove any trace of brand identity from your copy.
Trademark infringement is a variety of fraud, not a property crime. Your action did not deprive Hermes of its ability to keep or sell its bag, but it did damage its ability to sell the bag for 10 times production cost by diluting and confusing the brand.
However, producers don't get to complain about piracy by people who aren't in their market. Unless they eventually put the product on sale at some point, a pirate has no impact on the bottom line. In the simple (one-price-forever) case, the producer lost nothing - not even potential profit, because the consumer was already priced out.