Comparison table [optional]: compare social rules for atom good and digital goods

Once you have a copy of a digital good, you can endlessly copy it (almost) for free and instantly.

This means that the owner of the original can sell as many copies as they like with no added production cost.

Think of copying MP3 music files or pieces of software.

?? This can be massively profitable. Think of a farmer who owns an apple tree which can grow an unlimited number of perfect apples, instantly. The farmer would be rich!

As creating new copies of digital goods is near costless, essentially all of the costs of their production come from creating the first copy.

Only 1 person can wear the same pair of shoes at once. If we both want the same pair of shoes, then we each have to pay for the extra materials and processing to create them.

But an unlimited number of people can listen to the same digitally recorded song at once, as there are no extra costs involved in copying the original to distribute.

As there is no cost to creating additional copies, it makes no difference whether 2 people use the good or 2 million.

Creators / innovators need a way of recouping their (often significant) costs to create the first copy (and the risk involved)

But once some has a copy of the information (digital good) they can make as many copies as they want ... for free and distribute it to everyone else who might like it for free. Think of music pirating.

IP law tries to go down the first route by trying to make digital goods function like physical goods (i.e. introduce artificial costs for the purchase of new copies).

Certain types of public funding can be used to achieve the second outcome (we'll address these later)

Fall short: pricing for new copies means many people can't afford to access them. This limits the social value that can be generated by people using your good.

Go bad: your firm begins to behave like an extractive monopolist to defend its proprietary business model.

Look at the massive wealth and power now concentrated in the hands of tech billionaires. A large proportion of this inequality is due to their ability to exploit the combination of IP law and costless copying.

Stagnation and lack of innovation. Limit freedom of enterprise. We're also hindering innovation. Monopolists have an interest in snuffing out competing innovations to protect their business models. It's common practice for large firms to buy-up small competitors and then close them down (i.e. not release their products) to eliminate challenges to their business.

Digital or (information goods) are more than you think e.g. includes pharmaceuticals or even most physical stuff today e.g. your chair needs a design, food may be genetically modified, the tractor that ploughed the field has GPS etc

Some facts about centrality of information in our economies (if it even needs saying)

People have a wrong mental model ... imagine you the the world was flat when it was round ... bad things would happen ... TODO

because creating the first copy involves labour and capital (and skilled labour and specialist capital). Think of a hollywood movie, or the team of software engineers writing a new app

The creative process is inherently uncertain and therefore risky.By definition new information or new knowledge is not known in advance. Sure there is uncertainty being a farmer about next year's harvest, but the uncertainty with knowledge production is intrinsic to the very nature of the thing being produced

There is one key principle that once you see it everything makes sense ...

How do i design business models for a digital world ...

Implication 2: all revenue from copies is profit because there are no costs to copying. So digital goods can be highly profitable ...

Fancy economic terminology to wow your friends with ...

This rapidly drives the "price" towards zero - the cost of copying

Aside: this may also explain part of the slow pace of technical advance for much of human history. Until we had ways to solve the collective action problem either through state funding of research or monopoly rights or ... it was hard to justify investing ...

So we have a problem: as a creator if i spend money creating a first copy but know that price will go to zero i'll end up out of pocket. Maybe we could all collectively get together to fund the "first copy" but this is hard because of the free rider issue - ....

Society faces a dilemma: increasing money for creators will come at the cost of raising prices (inefficiently) above the cost of copying and exclude some users from access ...

Aside: address what can seem like exceptions to people e.g. there seems lot of music. But think of how many musicians make money compared to e.g. restaurants or farmers in the old days. Distribution of weatlh is massively skewed in comparison

Law of the one or the few: costless copying means one provider can supply everyone. Think of restaurants compared to the internet (or google, facebook, operating systems like windows)

This becomes monopoly/oligopoly with monopoly rights ...

If we create monopoly/exclusive rights then we create conditions for monopoly (one producer controlling the whole market) or oligopoly (a small number of producers controlling the whole market).

We are basically recreating the example of the farmer with the apple tree that instantly produces unlimited apples for free.