The Supreme Court has been hearing a major case on file-sharing. Should Grokster and other web-based file-sharing services be held liable for contributory copyright infringement? Forget about the law, what does the economist say? Yes "fair use" provisions are excessively stringent, but here are three reasons why I cannot accept the radical anti-copyright position.
1. In ten year’s time, what will happen to the DVD and pay-for-view trades? BitTorrent allows people to download movies very quickly. Note that DVDs already account for more than half of Hollywood domestic revenue. Furthermore the process will be eased when TVs and computers can "talk" to each other more readily. Yes, I am familiar with Koleman Strumpf’s excellent work showing that illegal file-sharing has not hurt music sales. But a song download can be a loss leader for an entire CD or a concert tour. Downloading an entire movie does not prompt a person to spend money in comparable fashion.
2. Perhaps we can make file-sharing services identify (and block) illegally traded files. After all, the listeners can find the illegal files and verify they have what they wanted. Grokster, sooner or later, will be able to do the same. Yes, fully decentralized and "foreign rogue" systems may proliferate, and any identification system will be imperfect. But this is one way to heed legitimate copyright suits without passing the notorious "Induce Act."
3. I question the almost universal disdain for the "Micky Mouse" copyright extension act. OK, lengthening the copyright extension does not provide much in the way of favorable incentives. Who innovates with the expectation of reaping copyright revenues seventy-five years from now? But this is a corporate rather than an individual issue. Furthermore economic research indicates that current cash flow is a very good predictor of investment. So the revenue in fact stimulates additional investment in creative outputs. If I had my finger on the button, I still would have pushed "no" on the Mickey Mouse extension, if only because of the rule of law. Privileges of this kind should not be extended repeatedly due to special interest pressures. But we are fooling ourselves if we deny that the extension will benefit artistic output, at least in the United States.