Market Failure? The Case of Copyright

by Jeffrey Tucker
Apr. 03, 2012

How gigantically humongous and intrusive is the federal government? A traditional measure is to look at the pages of regulations in the Federal Register, which is, by now, probably the world's largest book collection. The problem with this approach is that it takes no account of how a single bad regulation can have monstrously deleterious effects.

Copyright regulation is a good example of this. There was no universal enforcement until the very late part of the 19th century, and terms were mostly short in the early days of this regulation. In the course of the 20th century, regulations became ever more tight and the copyright terms ever longer, so much so that today, the words you sign away to a conventional publisher are theirs to keep for your lifetime plus 70 years!

One standard argument for this doing is that noncopyrighted works will not be efficiently exploited. You have to assign ownership or else the resource will vanish into the ether. No one will care about it, and civilization will lose extremely valuable literary works. Our market for ideas will be impoverished.

Now, to me, this argument seems obviously false, but that's probably because of my own experience in publishing. I've seen it happen — so many times that it is predictable — that once a work has fallen out of print but is still under some kind of protection, it is mostly neglected by the heirs. No one who "owns" the work has the incentive to bring it to light, while those who care about it fear the law or don't want to pay some arbitrary price set by the owners.

Meanwhile, when a work is public domain, there are dozens of people bidding to get it into print. This was true all throughout history, actually. The reason American school kids in the 19th century read British literature is that it was not regulated in the U.S., and therefore, it could be sold very cheaply and distributed very widely. It is true today: Whether music or books, the material in the commons is far more in demand than that which is regulated. And the demand leads to the supply.

In other words, the opposite of the conventional exploitation theory is correct. The copyrighted works drop from memory, while the public domain works last and last. But of course, this observation draws from my deep involvement in the industry, and we can't expect academic scribblers to understand anything about how the world actually works in real life.

One academic, however, actually bothered to test the theory that protected works are more widely available than works in the commons. The research of Paul Heald of the University of Illinois College of Law shows that public domain works are far more widely distributed, while protected works have a habit of falling down the memory hole.

Lately, he worked with a research assistant who came up with a script that dug through the Amazon.com book inventory to look for books currently in print and their years of publication. With the invention of scanners and print-on-demand technology, there was an explosion of works — and, of course, works that are in public domain because they were published before 1922.

The point is thereby thoroughly proven, and the "market failure" argument against the free market is once again debunked:

But there is more significance to this chart than meets the eye. For years, I've suspected that there was a serious problem developing due to government regulations. There is a vast gap into which millions of books have fallen. They can be reprinted or republished only at high risk and expense. Many of these books have uncertain copyright status or the "owners" are asking too high a price, can't be found or are orphaned. The costs are too high. I've had experiences with probably a hundred or so titles in this class, and I've always assumed that thousands or millions more fall into this category.

There was a brief moment in the early days of Google when the company naively imagined that it could do the right thing and make all of this literature available for instant viewing and printing. They had the technology to rescue it all and bring it to the whole world. Publishers, backed by regulations that favor them, went bonkers. Google tried a profit-sharing agreement. Didn't work. Finally, Google bailed and cooperated with the prevailing system.

The results you see in this graph. There is an 80-year black hole in which literature is being buried. In some ways, a whole century of ideas is being forced under a rock by government in league with large publishers. And it is getting worse by the day. Publishers are going through their back catalogs and threatening anyone who puts even a scrap online. Not that they plan new editions; they are just claiming what they think of as their assets.

This is a case of incredibly tragic loss. As you can see from the above chart, the literature of 1850 is more available than the literature of 1970. How preposterous is that? This is all a direct result of unprecedented, outrageous regulations that have effectively put a censorship veil over history's most-productive period of literary creation. This entire world is trapped in libraries that no one visits or is being put on remainder racks so that libraries can create more space for coffee bars.

There is a more general lesson that pertains to all government regulations. Even one line can be impossibly damaging to industry and to social advancement. It is extremely difficult to quantify the losses. This is just one case, but it is an important one because it deals with the most important thing any civilization possesses: its treasury of ideas. That treasury has been thrown to the bottom of the sea. Someday, explorers will discover it and wonder how any society could have let this happen even though it had the means to do otherwise.
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Jeffrey Tucker, publisher and executive editor of Laissez-Faire Books, is author of Bourbon for Breakfast: Living Outside the Statist Quo and It's a Jetsons World. You can write him directly here.