Problem Set 8: Econ 101b: Fall 2005
The Nelson Report Is Shrill


My father clashes with Larry Lessig over GooglePrint:

IPcentral Weblog: Wednesday Morning Fights: DeLong vs. Lessig: Larry Lessig objects to my characterization of his characterization of Causby, and its connection to the Google Print program. At the end of the entry, though, he comments on an area in which we are in partial agreement, and that is worth re-emphasizing:

But there is one great and true part to DeLong's email. As he writes,

Causby was entitled only to the decline in his property value, not to a share of the gains from the air age.

Truly, if there is a principle here, that should be it. The baseline is the value of the property BEFORE the new technology. Does the new technology reduce THAT value. Put differently, would authors and publishers be worse off with Google Print than they were before Google Print?

To ask that question is to answer it -- of course the authors and publishers are better off with Google Print.

Are they as well off as they could be, if the law gives them the power to extort from the innovator some payment for his innovation?

To ask that question is to understand why this case has been filed: Like Valenti with the Betamax, the publishers and Authors Guild simply want to tax the value created by Google Print. They are not complaining about any "decline in [their] property value" caused by Google Print. They are instead racing to claim the value that ancient law is said to give to them, despite the harm that claim produces for "progress."

This is indeed the crucial distinction. But I don't think Lessig is fair to either Valenti or the authors; they have genuine and legitimate concerns about the impact of the new technologies on their existing values.

Would they like to hold the new technologies for ransom? Probably. There is certainly grounds for suspicion in a recent oped co-authored by Pat Schroeder. And I agree with Lessig that such ransom should not be permitted, as the Supreme Court specifically noted in the Sony case. But to refuse to allow ransom does not mean that the legitimate interests can be ignored.

In the case of Google Print, the publishers legitimate concerns include two problems:

1) A digital copy of each book goes to the participating library, and the only restriction is that it abide by copyright law. There can be no guarantee that the library will impose security akin to that adopted by Google.

2) The law has no doctrine that allows Google to be special. So what Google is allowed to do, others can do. The authors and publishers can legtimately object to having a huge burden of policing imposed on them. In our internal PFF debates, I am the Google-symp -- but I have not come up with a way to solve these problems.

Nonetheless, as I said in another, longer recent discussion of these issues: "So the bottom line is -- and must be -- that when technological change occurs, we as a society will not automatically assign the value created by the new technology to existing property holders.

I tend to put on my right-wing public-choice hat here, and side with GooglePrint. The private beneficiaries from assigning too much of the value of innovation to the dead hand of old property rights are concentrated. The private beneficiaries of assigning too little of the value are diffuse. In a public-choice world ruled by lobbyists, there will be strong pressures on legislation and law to overprotect existing property. And it is the duty of intellectuals seeking the sweet spot to push back--to be an anti-lobbyist lobby.