New Paper Takes on the Myth of Free

Zeno’s Paradox describes physical change as an illusion. Zeno of Elea, in the 5th Century BCE, postulated that in order to travel any distance, one had to first travel half that distance, and before that half could be traversed, one had to travel half of the first half, and so on. And because space could be infinitely divided, traveling through space would seem mathematically impossible but for the fact that anyone running headlong toward a brick wall will suddenly realize why we call Zeno’s theory a “paradox.” Or as Professor John M. Newman might put it, apropos his recent paper The Myth of Free, the sudden impact with the wall will be an encounter with the “friction of the real.”

Even a casual observer of the real world can reasonably conclude that we are not heading toward a market utopia in which goods and services are both free and abundant. Yet, despite the empirical evidence all around us, Newman’s new paper in the George Washington Law Review asserts that the Myth of Free is not merely pervasive among academic theorists but has been wreaking havoc in applied law and policy for years. He writes …

“Legal institutions have already begun to grant an undeserved protected status to the suppliers of Free products. Such suppliers have received de facto or de jure immunity from certain laws, as well as favorable treatment in close cases. This is so despite the reality that these firms engage in for-profit transactions that are structurally identical to traditional, positive-price transactions. That unjustified protected status undermines the rule of law and distorts natural market competition, harming total welfare.”

Newman’s paper should be required reading by jurists and policy-makers seeking to understand, in economic terms, many of the same principles that artists and creators—the first victims of Free—have been saying anecdotally for quite some time.

Artists and Creators Know This Story Well

Day-to-day arguments about copyright are apt to be about specific points of conflict, like duration of terms, methods of enforcement, application of fair use, court opinions, etc. But the broader social, academic, and political campaign against copyright’s purpose—advocating changes from radical revision to outright erasure—is largely predicated on this economic belief that once the internet became publicly accessible, we crossed some threshold toward a future in which goods and services will inevitably be be both free and abundant. Where scarcity itself would be eradicated.

Newman’s paper is among the first, if not the first, to formally rebut the Myth of Free based on economic analysis. Covering more ground in his 74 pages than I can adequately summarize here, copyright owners and advocates will immediately identify with Newman’s critique of Free’s “major premise,” which asserts that zero (or near-zero) marginal cost drops the natural price of goods and services to zero (or near zero).

“According to the Myth, once information-based products could be reproduced and distributed digitally, the marginal cost of such products began to map onto the ever-halving cost of trendlines of processing, storage, and bandwidth. Eventually costs became so low that prices inevitably dropped to zero. Free was born.”

Authors of creative works will recognize this “marginal cost” premise as the head-banging gibberish they’ve encountered for years from people like Mike Masnick ‘splaining the alleged zero-cost of digital distribution of works while simply ignoring the high cost of development and production of works.

As Newman puts it, “…the Zero-Cost Premise fails to account for both the stubborn persistence of costs and what is referred to herein as ‘the friction of the real.’” To put that in practical terms creators know very well, even if the distribution cost of a movie really were zero, the cost to produce the movie is never going to approach anything like zero. But Newman doesn’t even need to go there, instead demonstrating that even digital distribution is never going to approach zero cost either …

“Digital processing, storage, and bandwidth do not occur in some abstract realm that transcends scarcity. They occur in the real world, which means they come with real costs. Those cost may be quite low, and may decrease lower still, but they cannot reach zero.”

So, even the premise underlying the premise of Free isn’t true, hence Newman’s reference to Zeno’s Paradox in this part of his paper to describe the fact that the cost of bandwidth itself will not continuously halve itself until it becomes “too cheap to meter,” let alone implicate that all goods and services will soon become both free and abundant as a logical extension of this tech-utopian fallacy. “Those who claim the existence of zero marginal costs fall into the same trap as those who chase the elusive dream of perpetual motion,” Newman writes.

Many of the footnotes in The Myth of Free read like a Who’s Who of “Freeconomics” hucksters—Mike Masnick, Chris Anderson, Mark Lemley, Jeremy Rifkin, Amanda Palmer et al, but I was particularly struck by the attention Newman gives to rebutting the premises of Professor Lemley in context to previous posts on this blog. Readers may remember that Lemley is the academic who has accused some of his colleagues—and by extension advocates like me—of endorsing a “faith-based IP” doctrine that he claims ignores empirical evidence. But as Newman makes quite clear in this paper, proponents of Free are engaged in magical thinking that goes beyond anything we might generously describe as faith and can more accurately describe as denial.

“…those who foresee a coming of age of abundance tend to miss—or misunderstand—a crucial element of the dynamic, long-run view: demand is a moving target. With that element in place, such techno-optimism is revealed as misguided. It is, as those who espouse the Myth of Free rightly recognize, a mistake to view technological innovation solely through the lens of short-run employment effects.”

In other words, when people like musical artists say the math of Free doesn’t add up, it’s not because they’re “clinging to old models,” trying to sell buggy-whips in a market of driverless cars.  It’s because the math of Free doesn’t add up.

As mentioned, it’s hard to imagine anyone observing the world today and believing that we are trending toward a post-scarcity utopia. But I suspect this particular idealism happened to emerge during a period when the failure to reign in certain excesses of capitalism demoralized the same generation that was being fed the hip and ebullient economics of Free. Quite simply, because the Napster generation collided with a market that was transparently bloated, corrupt, and offering dwindling opportunities, the conditions were probably ideal for evangelizing a vision of a post-scarcity future.  A vision of “sharing” that would somehow transcend market realities by virtue of “free” technology, which isn’t free at all.

Meanwhile, Newman describes in this TEDx talk that Free also has a specific neurological effect, which rewards gluttony and is consequently having a detrimental effect on both human activity and fundamental economics. “We as a society are dumping billions of dollars into developing ever more creative ways to first addict ourselves, then to extract from ourselves as much of our time and attention and personal privacy as possible, and then auction it off to the highest bidder.”

As if to underscore the point, Newman’s talk about the addictive nature of Free has just over 200 views, while Top 100 Viral Videos of 2107 has over 31 million.

© 2018, David Newhoff. All rights reserved.

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