Quote 1: The BBC News Online today –

“Jack Valenti, president of the Motion Picture Association of America, told BBC News Online earlier this year that digital piracy could become “debilitating” for the industry.

‘Digital piracy has become a real menace,’ he said. Despite the availability of pirate copies, The Matrix Reloaded has made more than $363.5m at the box office worldwide so far.“

Quote 2: Brad DeLong, Speculative Microecomomics For Tomorrow’s Economy, draft, November 14, 1999 –

“The ongoing revolution in data processing and data communications technology may well be starting to undermine those basic features of property and exchange that make the invisible hand a powerful social mechanism for organizing production and distribution. The case for the market system has always rested on three implicit pillars, three features of the way that property rights and exchange worked.

Call the first feature excludability: the ability of sellers to force consumers to become buyers, and thus to pay for whatever goods and services they use.

Call the second feature rivalry: a structure of costs in which two cannot partake as cheaply as one, in which producing enough for two million people to use will cost at least twice as many of society’s resources as producing enough for one million people to use.

Call the third transparency: the ability of individuals to see clearly what they need and what is for sale, so that they truly know just what it is that they wish to buy.

All three of these pillars fit the economy of Adam Smith’s day relatively well. …

But digital data is cheap and easy to copy. … Without the relationship between producer and consumer becomes much more akin to a gift-exchange than a purchase-and-sale relationship. The appropriate paradigm then shifts in the direction of a fund-raising drive for a National Public Radio station. When commodities are not excludable then people simply help themselves. If the user feels like it he or she may make a “pledge” to support the producer. The user sends money to the producer not because it is the only way to gain the power to utilize the product, but out of gratitude and for the sake of reciprocity.

This reciprocity-driven revenue stream may well be large enough that producers cover their costs and earn a healthy profit. Reciprocity is a basic mode of human behavior. People in the large do feel a moral obligation to tip cabdrivers and waiters. People do contribute to National Public Radio. But without excludability the belief that the market economy produces the optimal quantity of any commodity is hard to justify. Other forms of provision–public support funded by taxes that are not voluntary, for example–that had fatal disadvantages vis-a-vis the competitive market when excludability reigned may well deserve reexamination. …

[But t]he market system may well prove to be tougher than its traditional defenders have thought, and to have more subtle and powerful advantages than those that defenders of the invisible hand have usually listed.