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Some good news from the US Congress

November 14th, 2013 11 comments

The US Congress is rightly regarded as a dysfunctional mess, blocking vital legislation for trivial partisan reasons. But occasionally, things work out for the best. A variety of critics ranging from left and liberal Democrats to members of the Tea Party appear likely to derail ‘fast track’ authority for Obama to sign the appalling Trans-Pacific Partnership. By contrast, the Abbott government is keen to sign this secret deal and has dropped Labor’s objections to clauses that would allow foreign corporations to sue our government for policies inconsistent with the market liberal ideology that informs the treaty. Let’s hope the whole thing is slowed down until the 2016 election year. If that happens, the pressure to renegotiate the deal, or scrap it altogether, will become intense.

Coincidentally, Wikileaks has published a draft chapter from the agreement, hidden from us by our governments and making clear what everyone knows. This isn’t about trade but about imposing market liberal institutions, including strong intellectual property in pharmaceuticals, copyright and so on.

Big tobacco loses again

August 15th, 2012 84 comments

Until relatively recently, Big Tobacco appeared invincible. Despite the fact that tobacco smoke was full of known carcinogens that would have had a factory shut down if they came out of the smokestack, and ample evidence that exposure to tobacco smoke caused cancer, not to mention the violation of liberty associated with blowing smoke in public places, Big Tobacco effectively resisted even the mildest restrictions on its activities. It was aided by a team of scientists and other “experts” willing to claim that the hazards of smoking were non-existent or overstated (notable names here include Enstrom & Kabat, Gio Batta Gori, Richard Lindzen, Steve Milloy, Fred Seitz and Fred Singer – Google has details).

Virtually all the main rightwing thinktanks in the US and Australia went along with this fraud (AEI, Cato, Centre for Independent Studies, CEI, Heartland and IPA among many others). While they might legitimately have argued part of their case on strict libertarian grounds, that would not have been sufficient to resist restrictions on passive smoking. So, they published attacks on science which any reasonable assessment would have shown to be false. In doing so, of course, they encouraged people to take risks with their own lives and those of others, while happily accepting money from the merchants of death. Whether they were knowingly lying, or merely recklessly indifferent to the truth, this episode should have discredited them forever (it certainly has with me).

But the tide has turned. US litigation in the 1990s exposed a treasure trove of internal documents which eventually led to racketeering convictions for the main tobacco companies. And now the High Court has rejected Big Tobacco’s (legally preposterous) challenge to plain packaging legislation in Australia, made on the supposed basis that it represented a taking of intellectual ‘property’. Not satisfied with one preposterous claim, the tobacco companies are planning another, having bribed the government of Ukraine to make a WTO accusation of trade restraint. Actually, this is a good thing. This case is such an obvious abuse of process, and the litigants so clearly evil, that the WTO will surely not be crazy enough to support their case. In rejecting it, they will probably be forced to set precedents that make future interference with domestic health policy more difficult.

Coming to the policy merits, the current legal status of tobacco is, in my view, a pretty good model for drugs in general – legally available, but with all kinds of promotion prohibited and with an active public health campaign to give accurate information on the associated risks.

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The Internet is like a million-page a second photocopier (or is that a series of tubes)

January 19th, 2012 8 comments

Not long ago, I read Daniel Ellsberg’s[1] autobiography, Secrets, and also watched the film, The Most Dangerous Man in America. A striking feature of the book was that Ellsberg’s biggest problem in leaking the Pentagon Papers was the logistical difficulty of making 20 or so copies of a 7000 page cache of documents. It took him and a couple of helpers several months, IIRC. 

Now of course, such a task is easy, as demonstrated by Ellsberg’s successor (allegedly Bradley Manning) who supplied vast quantities of classified documents to Wikileaks. On the other hand, if Ellsberg had been 20 or so years earlier, he wouldn’t even have been able to make a single copy. [2]

The blackout yesterday as a protest against SOPA and PIPA reflects a simple fact about the Internet – it is, in essence a way of making and distributing vast numbers of copies of documents of all kinds.

Read more…

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Adventures in social network analysis: approaching the finale

May 17th, 2011 9 comments

A few years back as part of the attack on climate science (and in particular the famous ‘hockey stick’ graph) Senator Joe Barton commission an assessment of the work of Michael Mann and others from Professor Edward Wegman of George Mason University, along with his former student Yasmin Said and some others. This included, not only Wegman’s supposedly independent assessment of the statistical methods used by Mann but a ‘social network analysis’ of the relationship between Mann and his co-authors, which purportedly showed that Mann’s network of co-authors dominated the climate science field. As I pointed out at the time, Wegman et al started the analysis with Mann at the centre, so the primary result was that Mann had written a paper with every one of his co-authors! Nevertheless, a version of the paper was published in Computational Statistics and Data Analysis, in which Wegman took this analysis to the startling conclusion that senior academics should not collaborate with each other, but should instead work only with their students. Wegman follows his own advice in this respect, and now we can see why.

It’s just been announced that the paper is to be retracted on the grounds that it contains extensive plagiarism, much but not all of it from Wikipedia. Wegman’s response, showing the wisdom of his research strategy, is to blame his graduate student, who was not, however credited as an author. USA Today, which has taken the lead in following the Wegman plagiarism story, asked an actual expert to look at the paper and her reaction was about the same as my amateur assessment (Wegman and Said are also newcomers to the field, which may explain their heavy reliance on Wikipedia as a reference source).
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I Pencil: A product of the mixed economy

April 16th, 2011 107 comments

I’m thinking about doing another book, which would be a reply to Henry Hazlitt’s Economics in One Lesson a tract published in 1946, and available online, but still in the Amazon top 1000. It’s largely (as Hazlitt himself says) a rehash of Bastiat.

I’ll try to put up a prospectus soon, but I thought I’d start with something simpler, a response to Leonard Read’s 1958 I, Pencil. This essay is a description of the incredibly complex “family tree” of a simple pencil, making the point that the production of a pencil draws on the work of millions of people, not one of whom could actually make a pencil from scratch, and most of whom don’t know or care that their work contributes to the production of pencils. So far, so good. Read goes on to say that

There is a fact still more astounding: the absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being. No trace of such a person can be found. Instead, we find the Invisible Hand at work.

Hold on a moment!

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Yet another reason we would be better off without intellectual property

October 23rd, 2010 18 comments

How the Americans stole the Ugg boot

September 14th, 2010 20 comments

Felix Salmon has a great piece responding to a WSJ puff piece on the American trademark troll company that has stolen the name “Ugg boot” then used “intellectual property” laws to impose the absurd claim that the only genuine Uggs are those made in China.

The world would be a lot better off without intellectual property, or at least with a return to the more reasonable rules of the 19th century (14 years copyright, limited patents restricted to actual inventions, trademarks to identify products rather than to stifle competition) and the attempts of the US government to defend IP monopoly rights are one of the many reasons American “soft power” is such a perishable commodity.

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Kaggle

April 14th, 2010 8 comments

At dinner last night (an event to celebrate various research awards won by people at UQ) I was talking with an engineering professor about the question of how to promote innovation without reliance on patents and forms of monopoly rights (usually referred to as intellectual ‘property’). One solution is to offer prizes for valuable discoveries[1]. This is a nice idea, but there are lot of practical problems in setup and administration. Nicholas Gruen has an interesting startup, aiming to simplify this process. Read about it here.

fn1. This doesn’t rule out IP, but it offers a potential alternative.

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Don't free Mickey

June 24th, 2009 9 comments

I doubt that this is exactly what Ross Douthat had in mind, but I have been thinking for a while about one version of extending the duration of a limited-scope copyright. I’d support a proposal that gave Disney unlimited duration ownership of Mickey Mouse and similar characters, both for economic and political reasons. The political reason is straightforward: if Disney got its own side deal, they would have no reason to keep up the push for indefinite extensions of copyright for books and other things I actually care about.

The economic reason is that Mickey Mouse is not a character in a black and white cartoon produced in the 1920s (and cribbed off someone else, IIRC), and his copyright protection does not (except incidentally) act to restrict people who want to reproduce or adapt Steamboat Willie today.

Mickey is, in the terminology of the industry, a franchise. Disney puts millions into producing and promoting Mickey every year, and reaps even more millions as a result. I think it’s plausible to claim that each individual franchise of this kind is a natural monopoly, and that we would be less well served with multiple Mickey suppliers, as opposed to competing franchises like Bugs Bunny (there’s an analogy here with the debate over sporting teams and leagues which I’m too lazy/busy to work out in full). So, I’d be happy to allow Disney, Warner Bros, DC, Marvel and so on to have permanent rights over their characters, as long as they kept on using them.

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Suicidally strong IP ?

June 10th, 2009 22 comments

The strong showing in the EU elections by Sweden’s Pirate Party

is the outcome of yet another Pyhrric victory for the strong IP movement, which succeeded, a couple of months ago in securing prison sentences for the Swedish operators of filesharing site Pirate Bay. This galvanised about 7 per cent of Swedish voters into supporting the Pirate Party, which reflects the typical feelings of Internet users: hostile to intrusive and aggressive IP, concerned about privacy for individuals and households, in favour of transparency for corporations and governments. These feelings are, of course, diametrically opposed to those of the elite groups that have historically driven policy on these issues. In the light of this public reaction, and the absence of any corresponding electoral support for the IP lobby, governments everywhere will think twice before endorsing criminal prosecution of IP violators.

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Summer research fellowship in NY, and other IP news

April 16th, 2009 8 comments

If you’re interested in the relationship between ideas, interests and institutions, the development of intellectual property law provides a fascinating (somewhat self-referential) case study. The intellectual debate has been running hard against strong IP [1] for a long time, and changes in technology have not only made copying and reproducing all kinds of material much cheaper and easier, but have revealed, on a scale much larger than before, the benefits that can be realised from free access to ideas.

Meanwhile the extension of IP rights, and the expansion of powers to protect them has rolled on as if none of this was happening, at national (DMCA), bilateral (as a standard condition of US-driven free trade agreements) and global (TRIPS) level.

However, there are some positive countervailing developments, one of which has a summer fellowship attached (over the fold).

Read more…

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Putting the creativity back in creative capitalism

July 31st, 2008 7 comments

Although the conversation here takes place under the banner of ‘creative capitalism’ there has been relatively little discussion of creativity in the ordinary sense of the term. Yet the relationship between creativity and capitalism has rarely been more complex and interesting than it is today.

The central technical innovation of the past twenty years or so has been the rise of the Internet, and particularly the various incarnations of the World Wide Web. Without the Internet and the Web it is unlikely that we would have seen any significant recovery from the productivity growth slowdown of the 1970s and 1980s.

Yet neither the Internet nor the Web was a product of the market economy, and even now the relationship between market incentives and the social contribution made by Internet-related activities is tenuous at best.

Both the Internet and the Web developed as non-commercial activities, outstripping or absorbing a variety of commercial competitors (Genie, Delphi, AOL and so on) before being opened up to commercial use in the mid-1990s. And even since large-scale commercial involvement began, most of the exciting innovation continues to come from noncommercial users (blogs and wikis, for example) or from non-commercial content producers (YouTube, Flickr and so on). By contrast, heavily funded commercial innovations such as push technology and portals have failed or declined into insignificance.

The dominant driver of the Internet economy is not profit-seeking innovation but individual and collective creativity. Creativity is, and always has been, driven by a wide range of motives, some altruistic and others, like the desire to display superior skill, rather less so. Trying to tie all of these motives to direct monetary rewards is futile and, if pushed too far, counterproductive (More on this from me and Dan Hunter here, with discussion here and here).

Of course, corporations still have a large role to play in the economy of the Internet. A company like Google, for example, provides services that cannot easily be replicated by users acting either individually or collectively. But Google depends crucially and directly on the content created by users and more generally on the goodwill of the Internet community.

If these assets were lost, Google would be vulnerable to displacement; Microsoft’s loss of its seemingly unassailable dominance of both personal computing and the Internet software market is an illustration. Google’s slogan ‘don’t be evil’ and its sensitivity to criticism, for example over its compliance with Chinese censorship laws, illustrates the point. Equally, so do the many products Google creates and gives away, with no obvious path to future profit.

So, more than in the past, it makes sense for corporations to cultivate diffuse goodwill, rather than focusing solely on profit, perhaps modified by the need to buy off powerful interests. In the context of an economy where creative collaboration is central, this can’t be done through a neat separation of targets and instruments, with a charitable PR-oriented effort bolted on to a profit-maximising corporation.

Extending all of this to the challenge of helping poor countries develop creates further challenges. Companies will need to do more than bring corporate expertise to bear on the problem. They will also need to mobilise contributions of skills and resources from outside the company. If such contributors are not to feel exploited and abused, the project can’t be directly tied to the goal of profit maximisation. All this may yet be a bridge too far.

Richard Posner recognises much of this but argues that corporate managers should instead adopt a hypocritical pose of general concern until they have secured a userbase large enough to be locked in, then exploit it to maximise profits. There are a several problems here. First, sincerity is not as easy to fake as all that, particularly in an organisation where you can’t let everyone in on the joke. Second, setting up a monopoly by stealth, then extracting the maximum rent is a trick that can be pulled off at most once. Finally, if the managers of a company are chosen to be capable of successfully conning the public in the interests of shareholders, why would anyone expect them to forgo the chance to enrich themselves at shareholders’ expense.

Mickey and Winnie

March 6th, 2007 3 comments

My piece in Thursday’s Fin was on the malign influence of the Disney Corporation on copyright. My conclusion

there is room for a reasonable compromise … [but] the latest extensions of copyright have produced a system so lopsided that we would be better off scrapping the entire monopoly system and relying on the ingenuity of the free market to reward authors.

Read more…

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Plug

September 11th, 2006 1 comment

Nicholas Gruen will be talking on social production and open source in Melbourne on Wednesday. It’s for the Fabian society (impressed that Race Mathews has kept this going).

Details:

“New Models of Social Production: Open Source and its economic and social significance.�

Meeting details are 6 for 6:30pm to 8pm, Wednesday, 13 September, in Meeting Room 1, Trades Hall (Victoria Street Entrance), Cnr Lygon and Victoria Streets, Carlton. Australian Fabian Society members $6, non-members $8, concession $3.

It sounds fascinating. I’ll chase the paper and report on it if I get time.

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Creative Commons license upheld

March 28th, 2006 2 comments

Via TidBITS, this report that a Dutch Court has upheld the validity of a Creative Commons license which allowed only non-commercial use. The case involved well-known podcaster Adam Curry and a tabloid magazine that used photos from his Flickr site.

While not binding on other jurisdictions, the Dutch ruling, which enforces the plain meaning of the license, lengthens the odds against anyone trying to challenge CC licenses.

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Theme competition

February 18th, 2006 3 comments

I finally got around to checking out the podcasting feature in iTunes today (I know I’m way behind the times, but I’m a texty kind of guy). It’s pretty kewl.

By coincidence, I also got an email today from Nicholas Gruen about a Theme Competition for The National Interest. The idea is to get an open-source theme that will allow podcasting of the show, by avoiding copyright problems with the existing theme.

Self-plagiarism

November 16th, 2005 15 comments

In the Media and Culture journal M/C, Lelia Green has an interesting piece on self-plagiarism, linking referring to a site called Splat which asserts

Self-plagiarism occurs when an author reuses portions of their previous writings in subsequent research papers. Occasionally, the derived paper is simply a re-titled and reformatted version of the original one, but more frequently it is assembled from bits and pieces of previous work.
It is our belief that self-plagiarism is detrimental to scientific progress and bad for our academic community. Flooding conferences and journals with near-identical papers makes searching for information relevant to a particular topic harder than it has to be. It also rewards those authors who are able to break down their results into overlapping least-publishable-units over those who publish each result only once. Finally, whenever a self-plagiarized paper is allowed to be published, another, more deserving paper, is not.

Splat also refers to

textual self-plagiarism by cryptomnesia (reusing ones own previously published text while unaware of its existence)

(I know all about this) Green takes a more nuanced view and has some interesting discussion.
Read more…

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Academic exercises

August 11th, 2005 47 comments

Sinclair Davidson had a piece in the Fin the other day, attacking the Australian Research Council, which pays my salary (Davidson also gets ARC Grant Money, as he notes). The argument turns, not on specific deficiencies of the ARC but on the general claim that pure research undertaken with government funding has little economic benefit. In the good old days, when confronted with this sort of claim, we research types would wheel out a few trusty examples like cactoblastis and ENIAC, but they’re getting a bit old and tired nowadays.

I remember talking about this a decade or so ago, and somebody said the universities were developing this great new communications system that would revolutionise the economy. What was it called? Interweb? WorldWideNet? Mosaica? Can anyone remember what happened to it? If someone could find any evidence that this idea had an economic impact, it might help to counter Sinclair’s argument.
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The Creative Commons as a default rule

July 20th, 2005 6 comments

Reader Ben Lancini points me to this piece by John Dvorak, attacking [or rather, confessing to not seeing the point of] the Creative Commons License. This has prompted me to write a post I promised ages ago, in response to Kim Weatherall and Nicholas Gruen. I won’t recapitulate the debate, but just state my own position.

I’ve chosen the non-commercial, attribution, share-alike version of the Creative Commons License. This says that anyone can reproduce my work from the blog, with attribution and for non-commercial purposes, as long as they share it under the same conditions[1].

I’ve chosen this, not because it’s necessarily the best option in all, or even most cases, but because it’s the best default rule. Anyone who wants to use material from the blog in this way can do so without asking me. And share-alike is a good feature for a default option, because it means that re-use is similarly free under the same conditions.

But if Hollywood wants to use bits of the blog in the forthcoming hit movie Crooked Timber of Humanity, they are not confined to the CC license. They’re free to fly me to LA, and make a stupendously generous offer for the commercial rights. Similarly, if someone wanted to use the posts without attribution for some good reason, they could always approach me and ask for permission.

More generally, if someone wants to do things differently they can propose a contract with me. The optimal default rule is one that protects most rights I might want to enforce, while allowing (without special permission) most uses I’d be unlikely to object to. Public domain fails on the first count, and standard copyright on the second. I think the Creative Commons License, in the particular form I’ve chosen gets the balance just about right.

The general idea of a default value is familiar to anyone who’s done any computer programming and I imagine that if things were put to Dvorak in this way he’d see the point.

The ideas I’ve associated with default rules are commonly, but not, I think, very helpfully, discussed in terms of the supposedly ‘viral’ nature of licenses, particularly in relation to software and the Gnu General Public License. The idea of a default rule clarifies what is going on here. You can only have one default. At one time this was public domain (since it was necessary to make a specific claim for copright). Now it’s copyright, and advocates of strong IP take this as normal and natural. But if you want to use GPL or CC material with a share-alike license you have to adopt this default. From the viewpoint of people who take copyright as natural, but see CC material expanding, this is like a virus.

fn1. Nothing I do with the license affects rights of fair use (not that these are very extensive in Australia, but this may change for the better).

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Creative Commons license

July 1st, 2005 16 comments

Shamed into action by my imminent presentation on the topic at the Adelaide Festival of Ideas, I’ve finally got around to licensing the blog under the Creative Commons (it’s at the foot of the page – the layout still needs a bit of work). The license I’ve chosen is Attribution-NonCommercial-ShareAlike 2.1 Australia, which pretty much sums up the standard expectations for a blog. Anyone can use as much as they like for a non-commercial purpose, as long as they allow others to do the same with the derivative work, and acknowledge my original authorship, either by name or with a link back to the original post.

The Creative Commons is a crucially important initiative. The most important innovations of the past twenty years, those associated with the rise of the Internet, have been driven primarily by bottom-up creative collaboration and not by intellectual property or centrally planned research. On the whole, patents have actually obstructed the process. Government funding for research has helped a bit, but it has been a secondary factor.

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The NYT goes cash for comment

May 21st, 2005 6 comments

ViaTimothy Noah at Slate, I learn that the NYT is going to start charging for access to its opinion columns. It’s not clear whether, and how, bloggers will be exempted from this – the NYT provides blog access to the archives (otherwise pay-per-view) through its RSS feeds

Speaking as a reader, I wouldn’t want to pay for the NYT Op-Ed page. The Editorials are worthy, but not very exciting. Of the columnists, only Krugman is consistently excellent, and most of his columns consist of necessary repetition of important truths well-informed readers are aware of, but most commentators are unwilling to harp on for fear of being called “shrill”. Kristof, like the little girl in the rhyme, is very, very good when he’s good, but that’s not always. And Herbert is steadily good, if sometimes overly earnest. After that, there’s a long tail, with columns more often useful for mockery than for endorsement.

As a blogger, there’s no point in paying for something if you can’t link to it. That’s why the WSJ is so thoroughly marginalised in the blog world. So unless the NYT finds a way around this, they’ll be cutting themselves off from the most active part of the public debate, and presumably missing out on quite a few potential readers.

Real and virtual weapons

April 1st, 2005 21 comments

I’ve been interested for a while in the extra-game markets for items like weapons, spells and so on created in online games. This story involves two Chinese gameplayers who acquired a highly valuable virtual sword. One of them borrowed it and sold it for about $1000. The other player went to the police without result, and eventually confronted his partner, and in the ensuing argument, pulled a knife and stabbed him to death. It’s sad that this happened, but the most interesting aspect for those not directly involved is the question of whether the seller had committed a crime, and if so what. The following discussion is based on very limited knowledge, so feel free to correct me.

Even if this was a real sword, I doubt that the police would have become involved in the dispute because it was jointly owned, so only a civil action would have been available.

More generally, if the law does become involved in this kind of dispute, it’s unlikely that ordinary property law is the right place to look. Even if your virtual castle may look like genuine, it isn’t real estate. It’s the product of a contract between you and the game’s operators. In many cases, that contract forbids outside resale of items, so your rights are pretty limited. But even in a game like Entropia which encourages such things, your rights over virtual items are defined within a set of rules created by the game operators. If, for example, they arbitrarily confiscated virtual land for which you had paid, your remedy, if any, would be under contract law or (in particularly outrageous cases) the game operators might be prosecuted for fraud.

Of course, all this could change. There’s nothing to stop governments creating new categories of virtual/intellectual property. But, as with intellectual ‘property’ in general, intuitions based on standard (rival, excludable) private goods aren’t likely to provide a good basis for thinking about such things.

There’s more discussion at TerraNova where this kind of issue has been debated before.

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Banned in Brisbane

February 2nd, 2005 65 comments

We in Brisvegas finally got to see Outfoxed on the ABC last night. It didn’t get a cinematic run because the Murdoch papers (a monopoly here) refused to run more than minimal advertising for it.

It was interesting. I haven’t seen enough of Fox to know whether it was a fair and balanced picture, but the traits depicted were exactly those of the RWDB bloggers who follow the same line as Fox on most issues[1]. Blatant partisanship is combined with a hypocritical pretence of devotion to the unvarnished truth. For “we report you decide”, insert “fact-checking their asses”.

There’s nothing wrong with partisanship, and I’m not shy about announcing my own position. But even partisans have an obligation to be truthful, while acknowledging that they are more likely to focus on facts that are consistent with their own world-view. From what I’ve seen, Fox fails this minimal test, while denying that what it presents is propaganda rather than news.

fn1. This isn’t true of all rightwing bloggers. Some engage in honest debate, and others make no pretence of objectivity. But Instapundit sets the pattern, and many others follow.

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Bill Gates invented the Internet?

February 1st, 2005 63 comments

Occasional commentator on this blog, Tony Healy, puts on his thinktank hat to criticise my latest piece in the Fin (Subscription required), writing for the (anti-open source) Institute for Policy Innovation. I argued that most innovation on the Internet had not been driven by patents and copyright, but by creative collaboration of which blogs are, for me, the paradigm example. Tony’s response starts with Google, which is fair enough. Although there are lots of oddities about Google’s business model, it’s a commercial product (as are its competitors) and it’s an essential part of the Internet.

His next claim, though, strikes me as simply bizarre. He says

The Internet was an academic curiosity until the (commercial) release in the mid-90s of Windows 95 which, for the first time provided transparent access to the Internet, vastly expanding the population that could access the Internet

I’m a veteran of the Mac-PC wars, and I’m confident that of all the many claims and counterclaims I heard before 1995 “PC users can’t access the Internet” was not one of them. It’s true that setting up peripherals of all kinds has become easier over the years and that “Plug and Play” was a big Mac advantage in general before W95 (and to some extent still is), but if it was as decisive as Tony suggests here, Microsoft would have been out of business long before 1995.

I’ve seen many accounts of the Internet in which Gates played a key role, but the decision they point to is the free release of Internet Explorer, in competition with Netscape. This doesn’t suit the case Tony is making and he doesn’t mention it.

So, I should modify my claim that nothing worthwhile came out of the dotcom mania. Search engines and Google in particular benefitted from dotcom money. This raises an interesting question for my more technically qualified readers. If there were no dotcom money around, could the usual collaborative processes of the Internet have produced something like Google, or would we still be relying on favorites lists and so on?

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The Everquest Economy (crossposted at Crooked Timber)

January 28th, 2005 10 comments

The Economist has an interesting piece on the interaction between the economy in massively multiplayer games and that of the real world. The classic study of this question is Castronova’s analysis of the economy of Norrath, the setting for Everquest. Among various features of Norrath’s economy, one of the most interesting is trade with Earth through the sale of game items (weapons and so forth) via private treaty or on eBay[1]. This enables Castronova to estimate that the wage in Norrath is $US3.42 an hour, a figure that has some interesting implications.

At the Creative Commons conference last week, I heard a story to the effect that when the owners of one of these games tried to prohibit item trading they were sued and, in the course of litigation discovered that the plaintiff ran a sweatshop in Mexico where workers participated in the game solely to collect salable items. Clearly as long as the wage is below $3.42 there’s an arbitrage opportunity here. More technically sophisticated arbitrageurs have replaced human workers by scripted agents, working with multiple connections. Either way, arbitrage opportunities can’t last for ever, and are likely to be resolved either by intervention or inflation

The positive economics of all this are interesting enough. But how about policy analysis? Who benefits and who loses from this kind of trade, and do the benefits outweigh the costs?
Read more…

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Innovation and the internet

January 27th, 2005 6 comments

My piece in today’s Fin is on innovation and the internet, developing some of the ideas I’ve discussed recently. It’s over the fold
Read more…

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