Stop calling it “piracy”

Mar 17 JDN 2458560

It’s a bit of a pet peeve, but much like I insist people use “net wealth” instead of “net worth” (people are not worth more because they have more money!), I find it aggravating that the standard term for copyright infringement for personal use is “piracy”.

The word “piracy” is meant to describe some very severe crimes: Pirates on the high seas board ships to rape, enslave, and murder people. There are still actual pirates today, and they are murderous psychopaths. We glamorize pirates in much the same was as we glamorize organized crime; but the reality of actual piracy is horrific, monstrous violence. This is nothing like the “piracy” of copying songs and video games without permission.

If you need a word for copying songs and video games without permission, how about “unauthorized copying”? That’s what it is. You haven’t stolen anything. You’re not a pirate. You’ve copied something without authorization.

This can still be a harmful thing to do, and there are some cases where I think we rightfully make it illegal. But just from hearing the phrase “unauthorized copying” you can feel the difference: It already sounds like something that isn’t usually so bad and maybe shouldn’t always be against the law.

Indeed, it’s difficult to see exactly where the harm from most unauthorized copying is supposed to be. Even on the RIAA’s inflated estimates assuming that everyone who makes unauthorized copies would have otherwise purchased at retail price (which is clearly not true), total loss to the US music industry from unauthorized copying is less than $3 billion per year, while the total revenue of the music industry in the US is over $22 billion. So we’re talking about a roughly 12% reduction in revenue—and remember that this is an overestimate, because most of the people who make unauthorized copies would not have purchased the music at full price if they didn’t make the copies.

And most of those losses are to the very richest music producers, who are astonishingly rich indeed. The top 9 richest music producers in the US all have net wealth exceeding $100 million. It’s hard for me to see a 12% reduction in revenue for these nine-figure millionaires as a major loss to our society.

It might be a major loss to our society if weaker intellectual property enforcement had a chilling effect on the production of new content. And there is some reason to think that this could happen: Artists make their living selling content, and if that content can be copied for free it will be harder for them to make a living.

But it’s already really hard for most artists to make a living, and they make art anyway. There is no shortage of creative content in the world; indeed, there is an embarrassment of riches that makes it hard for new artists to break in and sometimes even hard for consumers to find the best content. If the goal is actually to support artists, there are obviously much better methods than granting Disney and Viacom totalitarian control over everything we read, hear, and see.

For instance, there are alternative modes of income support for artists that don’t require intellectual property enforcement, such as Patreon and Kickstarter. I make money on this very blog (not a lot mind you, but some extra spending cash) using Patreon without enforcing intellectual property. I’m not sure I could enforce intellectual property on my blog even if I tried.

A universal basic income is another option: Artists mostly create art because they want to, and only need to sell it because, like all humans, they have certain needs for food and shelter that must be met. With a sufficiently generous basic income, I think many artists would choose to share their work for free and live off the basic income, because it was never about making money but about creating art and spreading joy.

Or we could continue to enforce copyright, but in a much more limited manner: Say you get 30 years after publication, and whether or not your work has earned out by then, it goes to public domain and people can do whatever they want with it. Copy it, modify it, turn it into derivative works—yes, even make fanfiction and rule 34 porn, because that’s a form of artistic creation too.

I couldn’t find good data on this, but my suspicion is that most artistic works don’t turn a profit at all, and those that turn a profit generally do so within the first few years. Even if they paid out at a constant nominal rate, at any reasonable interest rate only about the first 30 years would really matter: At 7%, the net present value of $10,000 a year for 30 years is $124,000, while the net present value of $10,000 a year forever is only $143,000. This is because funds received in early years could be invested for that whole time (or used for something urgent and valuable), while funds received later can’t. There’s an old joke that may help you to remember that: “For $50, I’ll give you a million dollars! Such a deal! Oh, by the way, it’s $1 per year for the next million years.”

Extending copyright for decades simply doesn’t make sense if the goal is to support artists. (It makes perfect sense if the goal is to make Disney lobbyists happy.) Continuing to pay royalties for something you made 70 years ago may make you happy, but it wasn’t the incentive to produce that thing in the first place. I have trouble imagining an artist who would be willing to create a work if they received 70 years of royalties, but not if they only received 30 years of royalties.

In fact, economists studying copyright have estimated that the optimal duration of copyright to maximize creative innovation is even shorter than that: Only 15 years. There are a number of reasons for this, but perhaps the most important is that copyright can actually hinder some creativity, by making it harder to build off of the previous work of others. It’s one thing if all you have to do is re-name some characters in a novel and make a few other cosmetic changes (like Fifty Shades of Grey did; it was originally Twilight fanfiction); but that wouldn’t be so simple for a music remix or a video game mod. Depending on how the corporation that owns the original IP reacts, even a mod that looks and plays completely different could land you in court, because it was built on the same engine. There’s a great deal of ambiguity about just what constitutes a copyright violation in game modding.

And if we’re also thinking about patents as well as copyrights, intellectual property protection is the main cause of the high cost of brand-name drugs: People die because of that patent enforcement.

But there are complicated questions here about the proper way to balance the incentives. I think it would help to make the language clearer and less loaded: Don’t say “piracy”. Say “unauthorized copying”.

Defending yourself defends others

Mar 10 JDN 2458553

There’s a meme going around the feminist community that is very well-intentioned, but dangerously misguided. I first encountered it as a tweet, though it may have originated elsewhere:

If you’re promoting changes to women’s behaviour to “prevent” rape, you’re really saying “make sure he rapes the other girl”.

The good intention here is that we need to stop blaming victims. Victim-blaming is ubiquitous, and especially common and harmful in the case of sexual assault. If someone assaults you—or robs you, or abuses you—it is never your fault.

But I fear that there is a baby being thrown out with this bathwater: While failing to defend yourself doesn’t make it your fault, being able to defend yourself can still make you safer.

And, just as importantly, it can make others safer too. The game theory behind that is the subject of this post.

For purposes of the theory, it doesn’t matter what the crime is. So let’s set aside the intense emotional implications of sexual assault and suppose the crime is grand theft auto.

Some cars are defended—they have a LoJack system installed that will allow them to be recovered and the thieves to be prosecuted. (Don’t suppose it’s a car alarm; those don’t work.)

Other cars are not defended—once stolen, they may not be recovered.

There are two cases to consider: Defense that is visible, and defense that is invisible.

Let’s start by assuming that the defense is visible: When choosing which car to try to steal, the thieves can intentionally pick one that doesn’t have a LoJack installed. (This doesn’t work well for car theft, but it’s worth considering for the general question of self-defense. The kind of clothes you wear, the way you carry yourself, how many people are with you, and overall just how big and strong you look are visible signs of a capacity for self-defense.)

In that case, the game is one of perfect information: First each car owner chooses whether or not to install a LoJack at some cost L (in real life, about $700), and then thieves see which cars are equipped and then choose which car to steal.

Let’s say the probability of a car theft being recovered and prosecuted if it’s defended is p, and the probability of it being recovered if it’s not defended is q; p > q. In the real world, about half of stolen cars are recovered—but over 90% of LoJack-equipped vehicles are recovered, so p = 0.9 and q = 0.5.

Then let’s say the cost of being caught and prosecuted is C. This is presumably quite high: If you get convicted, you could spend time in prison. But maybe the car will be recovered and the thief won’t be convicted. Let’s ballpark that at about $30,000.

Finally, the value of successfully stealing a car is V. The average price of a used car in the US is about $20,000, so V is probably close to that.

If no cars are defended, what will the thieves choose? Assuming they are risk-neutral (car thieves don’t seem like very risk averse folks, in general), the expected benefit of stealing a car is V – q C. With the parameters above, that’s (20000)-(0.5)(30000) = $5,000. The thieves will choose a car at random and steal it.

If some cars are defended and some are not, what will the thieves choose? They will avoid the defended cars and steal one of the undefended cars.

But what if all cars are defended? Now the expected benefit is V – p C, which is (20000)-(0.9)(30000) = -$7,000. The thieves will not steal any cars at all. (This is actually the unique subgame-perfect equilibrium: Everyone installs a LoJack and no cars get stolen. Of course, that assumes perfect rationality.)

Yet that isn’t so impressive; everyone defending themselves results in everyone being defended? That sounds tautological. Expecting everyone to successfully defend themselves all the time sounds quite unreasonable. This might be what people have in mind when they say things like the quote above: It’s impossible for everyone to be defended always.

But it turns out that we don’t actually need that. Things get a lot more interesting when we assume that self-defense can be invisible. It would be very hard to know whether a car has a LoJack installed without actually opening it up, and there are many other ways to defend yourself that are not so visible—such as knowing techniques of martial arts or using a self-defense phone app.

Now the game has imperfect information. The thieves don’t know whether you have chosen to defend your car or not.

We need to add a couple more parameters. First is the number of cars per thief n. Then we need the proportion of cars that are defended. Let’s call it d. Then with probability d a given car is defended, and with probability 1-d it is not.

The expected value of stealing a car for the thieves is now this: V – p d C – q (1-d) C. If this is positive, they will steal a car; if it is negative, they will not.

Knowing this, should you install a LoJack? Remember that it costs you L to do so.

What’s the probability your car will be stolen? If they are stealing cars at all, the probability of your car being one stolen is 1/n. If that happens, you will have an expected loss of (1-p)V if you have a LoJack, or (1-q)V if you don’t. The difference between those is (p-q)V.

So your expected benefit of having a LoJack is (p-q)V/n – L. With the parameters above, that comes to: (0.9-0.5)(20000)/n – (700) = 8000/n – 700. So if there are no more than 11 cars per thief, this is positive and you should buy a LoJack. If there are 12 or more cars per thief, you’re better off taking your chances.

This only applies if the thieves are willing to steal at all. And then the interesting question is whether V – p d C – q (1-d) C is positive. For these parameters, that’s (20000) – (0.9)(30000)d – (0.5)(30000) + (0.5)(30000)d = 5000 – 12000 d. Notice that if we substitute in d=0 we get back $5,000, and at d=1 we get back -$7,000, just as before. There is a critical value of d at which the thieves aren’t sure whether to try or not: d* = 5/12 = 0.42.

Assuming that a given car is worth defending if it would be stolen (n <= 11), the equilibrium is actually when precisely d* of the cars are defended and 1-d* are not. Any less than this, and there is an undefended car that would be worth defending. Any more than this, and the thieves aren’t going to try to steal anything, so why bother defending?

Of course this is a very stylized model: In particular, we assumed that all cars are equally valuable and equally easy to steal, which is surely not true in real life.

Yet this model is still enough to make the most important point: Since presumably we do not value the welfare of the car thieves, it could happen that people choosing on their own would not defend their cars, but society as a whole would be better off if they did.

The net loss to society from a stolen car is (1-q)V if the car was not defended, or (1-p)V if it was. But if the thieves don’t steal any cars at all, the net loss to society is zero. The cost of defending a proportion d* of all cars is n d* L.

So if we are currently at d = 0, society is currently losing (1-q)V. We could eliminate this cost entirely by paying n d* L to defend a sufficient number of cars. Suppose n = 30. Then this total cost is (30)(5/12)(700) = $8,750. The loss from cars being stolen was (0.5)(20000) = $10,000. So it would be worth it, from society’s perspective, to randomly install LoJack systems in 42% of cars.

But for any given car owner, it would not be worth it; the expected benefit is 8000/30 – 700 = -$433. (I guess we could ask how much you’re willing to pay for “peace of mind”.)

Where does the extra benefit go? To all the other car owners. By defending your car, you are raising d and thereby lowering the expected payoff for a car thief. There is a positive externality; this is a public good. You get some of that benefit yourself, but others also share in that benefit.

This brings me at last to the core message of this post:

Self-defense is a public good.

The better each person defends themselves, the riskier it becomes for criminals to try to victimize anyone. Never feel guilty for trying to defend yourself; you are defending everyone else at the same time. In fact, you should consider taking actions to defend yourself even when you aren’t sure it’s worth it for you personally: That positive externality may be large enough to make your actions worthwhile for society as a whole.

Again, this does not mean we should blame victims when they are unable to defend themselves. Self-defense is easier for some people than others, and everyone is bound to slip up on occasion. (Also, eternal vigilance can quickly shade over into paranoia.) It is always the perpetrator’s fault.

How do you change a paradigm?

Mar 3 JDN 2458546

I recently attended the Institute for New Economic Thinking (INET) Young Scholars Initiative (YSI) North American Regional Convening (what a mouthful!). I didn’t present, so I couldn’t get funding for a hotel, so I commuted to LA each day. That was miserable; if I ever go again, it will be with funding.

The highlight of the conference was George Akerlof‘s keynote, which I knew would be the case from the start. The swag bag labeled “Rebel Without a Paradigm” was also pretty great (though not as great as the “Totes Bi” totes at the Human Rights Council Time to THRIVE conference).

The rest of the conference was… a bit strange, to be honest. They had a lot of slightly cheesy interactive activities and exhibits; the conference was targeted at grad students, but some of these would have drawn groans from my more jaded undergrads (and “jaded grad student” is a redundancy). The poster session was pathetically small; I think there were literally only three posters. (Had I known in time for the deadline, I could surely have submitted a poster.)

The theme of the conference was challenging the neoclassical paradigm. This was really the only unifying principle. So we had quite an eclectic mix of presenters: There were a few behavioral economists (like Akerlof himself), and some econophysicists and complexity theorists, but mostly the conference was filled with a wide variety of heterodox theorists, ranging all the way from Austrian to Marxist. Also sprinkled in were a few outright cranks, whose ideas were just total nonsense; fortunately these were relatively rare.

And what really struck me about listening to the heterodox theorists was how mainstream it made me feel. I went to a session on development economics, expecting randomized controlled trials of basic income and maybe some political economy game theory, and instead saw several presentations of neo-Marxist postcolonial theory. At the AEA conference I felt like a radical firebrand; at the YSI conference I felt like a holdout of the ancien regime. Is this what it feels like to push the envelope without leaping outside it?

The whole atmosphere of the conference was one of “Why won’t they listen to us!?” and I couldn’t help but feel like I kind of knew why. All this heterodox theory isn’t testable. It isn’t useful. It doesn’t solve the problem. Even if you are entirely correct that Latin America is poor because of colonial and neocolonial exploitation by the West (and I’m fairly certain that you’re not; standard of living under the Mexica wasn’t so great you know), that doesn’t tell me how to feed starving children in Nicaragua.

Indeed, I think it’s notable that the one Nobel Laureate they could find to speak for us was a behavioral economist. Behavioral economics has actually managed to penetrate into the mainstream somewhat. Not enough, not nearly quickly enough, to be sure—but it’s happening. Why is it happening? Because behavioral economics is testable, it’s useful, and it solves problems.

Indeed, behavioral economics is more testable than most neoclassical economics: We run lab experiments while they’re adding yet another friction or shock to the never-ending DSGE quagmire.

And we’ve already managed to solve some real policy problems this way, like Alvin Roth’s kidney matching system and Richard Thaler’s “Save More Tomorrow” program.

The (limited) success of behavioral economics came not because we continued to batter at the gates of the old paradigm demanding to be let in, but because we tied ourselves to the methodology of hard science and gathered irrefutable empirical data. We didn’t get as far as we have by complaining that economics is too much like physics; we actually made it more like physics. Physicists do experiments. They make sharp, testable predictions. They refute their hypotheses. And now, so do we.

That said, Akerlof was right when he pointed out that the insistence upon empirical precision has limited the scope of questions we are able to ask, and kept us from addressing some of the really vital economic problems in the world. And neoclassical theory is too narrow; in particular, the ongoing insistence that behavior must be modeled as perfectly rational and completely selfish is infuriating. That model has clearly failed at this point, and it’s time for something new.

So I do think there is some space for heterodox theory in economics. But there actually seems to be no shortage of heterodox theory; it’s easy to come up with ideas that are different from the mainstream. What we actually need is more ways to constrain theory with empirical evidence. The goal must be to have theory that actually predicts and explains the world better than neoclassical theory does—and that’s a higher bar than you might imagine. Neoclassical theory isn’t an abject failure; in fact, if we’d just followed the standard Keynesian models in the Great Recession, we would have recovered much faster. Most of this neo-Marxist theory struck me as not even wrong: the ideas were flexible enough that almost any observed outcome could be fit into them.

Galileo and Einstein didn’t just come up with new ideas and complain that no one listened to them. They developed detailed, mathematically precise models that could be experimentally tested—and when they were tested, they worked better than the old theory. That is the way to change a paradigm: Replace it with one that you can prove is better.