Seventeen Famous Economists Weigh in on Copyright: The Role of Theory, Empirics, and Network Effects

21 Pages Posted: 21 Jan 2004 Last revised: 24 Jan 2012

Stan J. Liebowitz

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics

Stephen E. Margolis

North Carolina State University - Department of Economics

Date Written: December 1, 2003

Abstract

The case of Eldred v. Ashcroft, which sought to have the Copyright Term Extension Act (CTEA, aka Sonny Bono Copyright Act) found unconstitutional, was recently argued before the Supreme Court. A remarkable group of seventeen economists including five Noble laureates, representing a wide spectrum of opinion in economics, submitted an amicus curie brief in support of Eldred. The economists condemned CTEA on the grounds that the revenues earned during the extension are so heavily discounted that they have almost no value, while the extended protection of aged works creates immediate monopoly deadweight losses and increases the costs of creating new derivative works. More important, we believe, than the particulars of this case, is the articulation of the economic issues involved in copyright extension. The articulation of those issues is not well framed in the brief. Nor is the case as one sided as the Eldred economists have claimed. First, private ownership of creative works may internalize potentially important externalities with respect to the use of existing works and the creation of derivative works. Second, the Eldred economists neglect the elasticity of the supply of creative works in their analysis, focusing instead solely on the benefits received by authors, leading to potential underestimation of additional creativity that confers benefits immediately. Third, the Eldred economists neglect certain features of copyright law, such as fair use, the distinction between idea and expression, and the parody exemption, which mitigate the costs of copyright. Finally, we present data that counters a common claim that copyright extension so far out in the future can have little effect on creativity. The small fraction of books that have the majority of commercial value when they are new appear to remain valuable for periods of time that are consistent with the expanded term of copyright under CTEA.

Keywords: Copyright, network effects, eldred, bandwagon, snob, intellectual property

Suggested Citation

Liebowitz, Stan J. and Margolis, Stephen E., Seventeen Famous Economists Weigh in on Copyright: The Role of Theory, Empirics, and Network Effects (December 1, 2003). Harvard Journal of Law and Technology, Vol. 18, No. 2, 2005. Available at SSRN: https://ssrn.com/abstract=488085 or http://dx.doi.org/10.2139/ssrn.488085

Stan J. Liebowitz (Contact Author)

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics ( email )

800 W Campbell Road
Mail Station SM 31
Richardson, TX 75080
United States
972-883-2807 (Phone)
972-883-2818 (Fax)

HOME PAGE: http://www.utdallas.edu/~liebowit/

Stephen E. Margolis

North Carolina State University - Department of Economics ( email )

Raleigh, NC 27695-8110
United States
919-513-2565 (Phone)

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