The Thumb on the Scale in the Winner Take All Economy

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Sunday, 23 February 2014 09:34

Robert Frank has an interesting discussion in the NYT of the "winner take all" dynamics created by the Internet economy, but he leaves out an important part of the picture. The notion of winner take all is that advances in modern technology allow the best in various areas to become hugely wealthy, while leaving almost everyone else out in the cold. There are reasons for disputing this view in general (see The End of Loser Liberalism: Making Markets Progressive --free download available), but the entertainment industry, the focus of Frank's piece provides excellent turf for framing the issues.

Frank points to evidence that an increasing share of sales of music is going to a relatively small number of big hit performers. He sees this as evidence of the winner take all theory. However there is an important aspect to this story that Frank neglects to mention.

The big winners get to be big winners because the government is prepared to devote substantial resources to copyright enforcement. This is crucial because if everyone could freely produce and distribute the music or movies of the biggest stars, taking full advantage of innovations in technology, they would not be getting rich off of their recorded music and movies.

The internet has made copyright hugely more difficult. The government has responded by passing new laws and increasing penalties. But this was a policy choice, it was not an outcome dictated by technology. The entertainment industry and the big "winners" used their money to influence elected officials and get them to impose laws that would restrain the use of new technology. If the technology was allowed to be used unfettered by government regulation, then we would see more music and movies available to consumers at no cost.

In other words, it is government regulation that makes a winner take all economy in this case, not technology. There are alternative mechanisms for financing creative work (here's mine), but the interest groups that promote strong copyright protection don't want the public to consider them.

It is worth noting that the government does not put the same effort into enforcing all laws. Years ago I did political work that often involved putting posters up in public places. People who disagreed with these posters tore them down quickly. Their actions were a clear violation of the law, but the police were not prepared to devote any resources to enforcing the law in this instance. There was no risk of major fines or imprisonment to individuals who broke this law regardless of how many times they did it.

It would be interesting to see the argument that there is a greater public interest in preventing the circulation of unauthorized copies of Miley Cyrus's latest hit than in protecting freedom of speech. Of course it's obvious where the money is in this debate.

Anyhow, insofar as we have a winner take all economy in the entertainment industry it is because we have laws that protect the winners, not technology. Best of luck to Robert's kids in their new band.