Thursday, March 05, 2009

Bringing in some economic analysis (2)

The development of a general theory of law, technology and society should go a long way towards providing a coherent lens from which to understand and intervene in the information / information technology policy process on several levels. In building this theory, attention needs to be paid to economic analysis, and we should remain mindful of the disparate theories and assumptions that inform different economic schools of thought.

A major weakness in the information / communications/ technology policy process (I’ll use information policy as a catch-all term that encompasses all of these and which includes substantive areas such as intellectual property, privacy, censorship, network policy, etc) stems from the failure to question many ‘taken for granted’ assumptions, particularly those about the nature of our economic system. As history shows that economic systems change over time, it is a mistake to assume one particular system as being universal and immutable.

Yet much policy making fails to get beyond certain assumptions about the superiority and inevitability of market exchange and the price system as the only possible allocative mechanism. Utilizing an approach rooted in critical political economy helps correct for some serious ‘blind-spots’ that, at least in the case of intellectual property and other information technology issues, results in the assumption that the public goods nature of information is a “problem” that needs to be “cured. This “cure” tends to involve crafting policies that utilize technological measures to induce scarcity, promote rivalry in consumption, and create new exclusion and control mechanisms, all with resulting negative social effects. Under the predominant utilitarian approach much in favor with contemporary policy makers, these social costs are often justified based on the need to foster economic incentives. On the surface at least, it would seem that economic analysis plays an important role in the information policy process. But when one cuts below the surface, it appears that the policy process is not quite so driven by any real economic analysis as much as by the power of economic interests. (Elsewhere I have more fully argued that copyright policy developments can be located within a broader framework of commodification and the logic of capital, and that a critical theoretical framework rooted in political economy is needed.)

The copyright policy environment in the United States in the mid to late 1990’s provides good examples of how an unswerving faith in market exchanges combined with a ‘circle-the-wagons’ response to the challenges of new technologies, resulted in some very skewed policies. Skewed, that is, in the direction of insuring that market mechanisms could operate without the increasing pesky interference being caused by the public goods nature of information. During that period, there was a convergence of several policy initiatives, which taken together constituted an unparalleled proprietization, (or maximalist drift as it was often called) of intellectual goods and services. Several measures were passed into law, such as the strong anti-circumvention and digital rights management rules in the DMCA, the Sonny-Bono Term Extension Act, the No Electronic Theft Act, the passage of UCITA in Maryland and Virginia, and the general ratcheting-up of mandatory levels of IP protection through trade agreements. Other measures failed to secure passage, such as a continuous series of sui generis database protection bills and UCITA in all but two states. But throughout this entire process, the policy process was generally devoid of any serious understanding of the relationship between law, technology, the economy and society. Little effort was made to try to understand how the technological advances on the horizon would interact with the social, cultural, political and economic practices. What little of what even tried to pass for economic analysis tended to focus on alarmist accounts of the dollar losses to the information and entertainment industries on account of piracy; or dire warnings of the impending demise of the domestic database industry should the problems created by the Feist case not be “cured” with expansive database legislation. (I have written a general critique of the database right and about databases in general elsewhere).

In retrospect we can view the passage of the anti-circumvention rules of the DMCA as a high-water mark of a backward-looking maximalist agenda, or perhaps better stated as the low-water mark of progressive and future-oriented information policy making. One only need review the Electronic Frontier Foundations “Unintended Consequences: Seven Years Under the DMCA” to get a sense of how ill advised this particular legislation truly was. That it was accompanied by other similarly oriented measures, and then exported for international adoption through an expanding series of trade agreements (which I have addressed elsewhere) only exacerbated the problems. It didn’t take long for even some of the key policy makers to have second thoughts about what they had unleashed in the heady 90’s (view Bruce Lehman’s statements at a 2007 conference at McGill).

For its part, Canada has done well in avoiding the excesses of the DMCA, but the pressure is still on to adopt similar policies. Substantive economic analysis, based on an understanding of how people are using new technologies and how the old business models might not be the best way to foster innovation, induce creativity and enable sustainable levels of growth, will help ensure that the Canadian policy process doesn’t fall victim to the same traps that the US fell into over a decade ago.

Perhaps in retrospect it is all too easy to say that the failure of the policy process was due to a lack of careful economic analysis or a clear understanding of the nature of the technological changes then underway. It might be that the forces pushing for these changes had simply captured the policy process at the time and no amount of economic analysis, (critical or otherwise) and no amount of technological insight would have changed anything. Economic times were good, and new information and communications technologies promised an optimistic future of seemingly unlimited growth and plenty.

For better or worse, today we are living under very different circumstances. Some of the utopian glitter of the high-tech enthusiasts has worn off (well at least some of it) and we are giving some serious thought of possibility of ordering our economic system in different ways, at least insofar as immediate government policies are concerned.

So all in all, I think now is a particularly good time to be working on the development of a general theory of law and technology (or law, technology and society) which takes due account of a wide range of cultural, social, political and economic factors. If the forces of technology can be utilized to expand access to intellectual goods rather than to devise ever more insidious exclusion, metering and surveillance systems it will take some conscious effort and some affirmative information policies. I thank the organizers of this discussion for moving this agenda forward, and I am grateful to have had the chance to participate.


Blogger Patrick S. O'Donnell said...

Could you please recommend a few papers and/or books (your own or others') that illustrate the use of a critical economic framework that goes beyond the assumptions of neo-classical economics (is there not work among welfare economists that, while consequentialist or utilitarian, is not focused on incentive effects?) in this area?

Thanks again.

3/06/2009 6:32 PM  
Blogger Patrick S. O'Donnell said...

I should have made clear that the parenthetical question is not meant to imply welfare economics is outside neo-classical economics, as it is not, it was only meant to suggest that this tradition in economics is surely capable of focusing on questions other than incentive effects or the sorts of questions one typically finds in the law and economics literature (particularly if we accept Sen's sympathetic critique of same).

3/07/2009 7:51 AM  
Blogger Samuel Trosow said...

Certainly, here are some books and articles...

Bettig, Ronald V. Copyrighting Culture: The Political Economy of Intellectual Property. (Westview Press, 1996.)

Boyle, James, Shamans, Software, and Spleens: Law and The Construction of the Information Society. (Harvard University Press, 1996.

Breyer, Stephen, "The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies and Computer Programs." 84 Harvard Law Review 281-351 (1976)

Drahos, Peter. Information feudalism: who owns the knowledge economy? (Earthscan, 2002).

Davis, Jim, Thomas A. Hirschl and Michael Stack [Eds.] Cutting Edge: Technology, Information, Capitalism, and Social Revolution, (NY: Verso, 1997) .

DeLong, J. Bradford and A. Michael Froomkin, “Speculative Microeconomics for Tomorrow's Economy” First Monday 5(2) (February 2000).

Dyer-Witheford, Nick .Cyber-Marx: Cycles and Circuits of Struggle in High-Technology Capitalism (University of Illinois, 1999).

Goldhaber, Michael H. “The Attention Economy and the Net” First Monday 2(4) (April 1997)

Heller, Michael.. “The tragedy of the anticommons: Property in transition from Marx to markets.” 111 Harvard Law Review 621-688. (1998)

Mosco, Vincent. The Political Economy of Communication: Rethinking and Renewal. (London: Sage, 1996

Perelman, MichaelSteal This Idea: Intellectual Property Rights and the Corporate Confiscation of Creativity. (Palgrave, 2002).

Schiller, Dan. Digital Capital: Networking the Global Market System (MIT Press, 2000)

Thurow, Lester C. “Needed: A New System of Intellectual Property Rights.” Harvard Business Review, 95-103 (September-October 1997)

Trosow, Samuel. “The Illusive Search for Justificatory Theories: Copyright, Commodification and Capital," 16 Canadian Journal of Law & Jurisprudence 217-41 (July 2003).

3/09/2009 9:50 AM  
Blogger Patrick S. O'Donnell said...


Thanks so much for taking the time to do this. It is quite helpful and much appreciated.

3/09/2009 12:05 PM  
Anonymous Anwalt said...

I think it is great article on the very important topic like this.One thing is inspire me that you have explain the three main silent points,Such as A restatement,I think it is called some times Recoupment is the practice.

7/16/2009 7:10 AM  
Blogger Baba said...

Thanks for this collaborative article and also for the recommendation books and other articles that can make this post more clearly.

"the failure of the policy process was due to a lack of careful economic analysis or a clear understanding of the nature of the technological changes then underway." - I'm not quiet agree that was the reason, since, there some other contributed factors related to the failure. Sometimes the failure is due to each politician want to get their own profits without thinking about others welfare. Another factor is sometimes policy is made to justify and to legitimate a regime that in charge that time. So, it's not just because what you have said above. - bankruptcy forms

11/24/2009 10:57 AM  
Blogger Be Meo said...

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4/05/2010 12:41 AM  

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