How does the fashion industry work without copyright?

by on February 27, 2006 at 7:38 am in Economics | Permalink

Scott Cunningham directs our attention to "The Piracy Paradox," a new law and economics paper on the economics of fashion.  The authors argue that the fashion sector has more innovation because of its near-absence of copyright protection.  Here is some brief background on the issue. 

Fashion is a status good.  You wear a new design if some other people do (it must be focal as an object of status), but not if too many other people do.  You want some degree of exclusivity to your wardrobe.  So let’s say a new design comes out.  There will be some early adopters, but then a rapid series of rip-offs from other companies.  Once the rip-offs come, companies invest in making further designs.  Fashion is ephemeral and the rip-offs spur the next round of innovation.  (BTW, here is an economic model of innovation in the fashion sector, and here are some common-sense critiques.  Here is a piece on the ethics of fashion copying.)

Ex ante, the companies invest in production capacity.  They don’t know if they will be copied or copiers, but the costs and benefits wash to keep normal rates of return.  There is more to the argument but read the paper if you are interested.  By the way, the authors claim that European fashion industries receive much more copyright protection, but do not seem to be more efficient. 

Micro question: For this model to work, what underlying assumptions are needed about the costs of design relative to the dollar flow of fashion demand?  A low ratio of fixed to marginal costs?  A lingering cache from having been the first with a new style?  Here is one unconvincing attempt to answer the question; do tackle this in the comments if you have further ideas.

The authors list a few other areas where copyright protection is weak or non-existent: food recipes, furniture design, tattoos (until recently), trendy hairstyles, and perfume scents.  I would add to the list calligraphy, topiaries (I love that word), and chess games.  The point is not that these can serve as models for the music or movie industries but rather to figure out how they differ and why the absence of IP protection has led to (apparently) acceptable results.

Here is the legal reasoning why fashion is not well-protected.

Kathleen Fasanella, one of my favorite MR readers, directs our attention to this IP-related fashion blog.

A Tykhyy February 27, 2006 at 8:02 am

Regarding chess games — admittedly I don’t know much about chess, but I know about Go. Individual Go games are widely believed to be public and circulate freely, but large collections protect themselves in some fashion.

Phil Leif February 27, 2006 at 9:00 am

Pesendorfer? Fashion markets? Finally, a chance to shine! I explore this sort of thing on my blog: http://millionairesocialite.com/?p=184

Jason Ligon February 27, 2006 at 10:45 am

I’d think that the level of initial investment required for a given product in a given market to be competitive has a lot to do with whether copyright or patent is needed.

It is easy to imagine (because we have it) open source unpatented software of various sorts, but it is not so easy to see how someone on a lark would spend $400 million on pharmaceutical development.

Similarly, the creation of a dress requires a creative person to invest x amount of time, where x is much less than the time required to produce a novel.

I suppose a corollary would be that you are really incenting two different things – marginal innovation on fundamental (read-high sunk costs) designs on the one hand and new fundamental designs on the other. Patents may help the latter but harm the former.

ricardo February 27, 2006 at 11:10 am

I buy the ‘lingering cachet’ argument. Why do the habitual early adopters adopt X’s new garment rather than Y’s? It might be because it’s just fabulous (darling!). On the other hand it might be partly a coordination device: their payoffs come not just from the garment but from who else is wearing it. It’s easier to coordinate on something that has already been coordinated on before.

Bill Stepp February 27, 2006 at 11:42 am

On the other hand, illegal downloads of music CD’s are much more likely to affect sales of the originals because they are perfectly adequate substitutes.

Posted by: Peter at Feb 27, 2006

Affect sales in what way? By englarging a musician’s market, file sharing
may well increase his CD sales. Siva Vaidhyanthan presents evidence for this
in his book _The Anarchist in the Library_.
“IP” apologists implicitly assume that markets are zero sum games, so illegal music
downloading necessarily reduces a musicians sales and income. While this might
occur, it’s probably more likely that file sharing brings him new fans, who want to
buy his music.

Christopher February 27, 2006 at 11:57 am

Very interesting question, never thought about it before. I’m curious to see how the responses go.

J Klein February 27, 2006 at 2:27 pm

Copyright and patents are a modern concoction – a hundred years ago people composed symphonies and wrote great books without the benefit of Government protection. The Austrian court paid Mozart to compose pieces for their events not because there was no other music available, but because it was made for the occasion and because it was a well known composer. The London taylors were copied all over the world, but people still went to London to have their suits made for them.

It is feasible to defend the hypothesis that copyright and patents depress innovation. People will always pay a premium for the original.

Regarding the special case of patent medicines, the FDA is the main obstacle for a patent free system. If there is no FDA and no one controls the real composition or quality of the drugs sold on the market, I would happily pay the premium demanded by Pfizer for his original viagra, and would never dare to buy an anonymous pill by the internet. Nowadays, the FDA ensures that the original and the copy are identical, so I have no incentive to buy the original product. Of course, people who was tempted to buy the cheap copy, would sometimes be cheated and maybe killed by the product. That is the price of a free market and probably it would be self regulating in short time.

We should not overprotect the people, nor fear free markets.

Roger Meiners February 27, 2006 at 7:08 pm

As the cited legal piece notes, the ability of fashion designers to protect their innovations was undercut by the Supreme Court in its 1941 decision striking down the Fashion Originators Guild as in violation of antitrust law. As in other areas, private efforts to protect property are thwarted by antitrust law, thereby giving incentives to beg for a political resolution of the matter.

R Edwards March 1, 2006 at 12:30 am

Is there a better URL?

Olga Moore March 16, 2007 at 7:48 pm

Fashion is about creativity, it’s pure art! You can not lock it and chock it with the copyright boundaries…

Anonymous October 13, 2008 at 10:50 pm
Burr grinders January 12, 2010 at 5:19 pm

I’d think that the level of initial investment required for a given product in a given market to be competitive has a lot to do with whether copyright or patent is needed.Electric treadmill
Galileo thermometers
Huggable hanger

jjones October 4, 2010 at 10:46 am

This is an interesting concept. I’d never even thought about the lack of “copyrights” on fashion. It seems like designers would want some sort of legal rights over a design, but personally, I’m glad they don’t. That means that to me, as a consumer, other companies can create MORE of a same or similar piece, but for much less money. I’m a big fan of top designers who create the piece in the first place, but I’m glad there are ways for me to get it without going broke. -jjones from http://www.tracs.ca

Mendel Potok October 20, 2010 at 10:43 am

I’m so glad there is some press on this, it’s such a shameful fact in the industry. Jjones, are you serious? You think theft is perfectly fine? Would you buy a cheap car if you knew it was stolen? I’m sorry, but I’d like to live in a country of law and order.

ChichiQ November 16, 2010 at 8:13 am

Fashion today seems to be nothing but another series of events that allows people to fight one another… in terms of how is the best designer and how manages to sell more expensive items to people that actually think about buying fashion products as a must in their lives… Cufflink Case

muneeb February 24, 2011 at 8:08 am

I don’t think when you talk about fashion you can bring along the copyright term because how somebody posted upper.Fashion is about art and when it comes about art especially visual art you can’t talk about copyright..Pittsburgh events

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