Michael O’Hare on paying for music

Michael O’Hare offers what seems to me one convincing answer to the question of how to pay for recorded music, now that file-sharing is driving the existing system into the ground. (This responds, among other things, to Eugene Volokh’s objection to Paul Boutin’s suggestion of a tax on data transfer capacity and payments to the producers of music on a per-download basis.)

O’Hare suggests that music should be valued, and paid for, not by how often it is accquired (by purchase or download) but by how often it is listened to, and proposes a technically feasible and non-intrusive system to measure that, not perfectly but “well enough.”

Having everyone have access to whatever music he wants for a dollar per person per week sounds like an enormous bargain to me. But O’Hare’s essay is indespensible, even if you don’t agree with his proposed solution, for its clear-headed exposition of the values at stake.

The total now paid for the production and distribution of recorded music (about $10 billion a year) is small enough that O’Hare wants to pay for it out of general revenues rather than a dedicated tax. That makes substantive sense, but might be less politically workable than a self-financed program paid for by taxing data transfer, especially if that could be linked with an effective anti-spam measure. I’d never notice an email tax of a hundredth of a cent per kilobyte, but it would make the peddlers of unclaimed Nigerian bank accounts think twice before sending out their next million messages.

O’Hare doesn’t address the problem of shelling out tax dollars for offensive content, which would be something of a problem for music and a huge problem for video. Does anyone have a suggestion? I’d be for such a system even in the face of those issues, but it would be a hard sell in Congress.

As impottant as music and film are culturally, in economic terms they’re the rounding error in the revenues of the pharmaceutical industry. In that case, the problem of estimating value in the absence of a market is even harder than it is for cultural works.

But the fact that there will be valid objections to any proposal doesn’t mean that a new system wouldn’t be an improvement over the current system of patent and copyright protection. The forgone consumers’ surpluses from charging high prices for goods whose marginal cost of production is near zero are extremely high.

Since such goods will make up an increasing share of economic activity as far into the future as one can see, getting a non-terrible set of solutions is a policy problem of the highest importance. I hope O’Hare’s essay sparks the debate it deserves. Note that it’s still in draft, which means that it shouldn’t be cited but that it may be malleable in the face of convincing criticism or suggestions for improvement.

[Adam Liptak in today’s New York Times reports on the related question of “designer seeds.” [*].]

[My previous thoughts on this topic are here (responding to Brad DeLong [*] and here responding to William Safire.]

[William Fisher of Harvard Law School has a long, scholarly essay here, part of a book-in-process titled Promises to Keep.]

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com