Wednesday, October 10, 2007

Indignation from a lack of understanding economics

As I often do, I'm reacting to a NYTimes piece about education. Here's the link. Basically, a student organization known as the Students for Free Culture are pretty much opposed to all intellectual property right law. They believe that music, art, and books should be freely available, all software should be open source (though the reporter never uses that term, that's what's meant), drug patents shouldn't be enforced, etc. Some members are upset at being fined for illegally downloading music, but others are protesting what they see as too high of prices of powerful medicines, etc.

I can see why they'd be upset. The fines for illegally downloading music strike me as disproportionately high. And it can be hard to think that companies should be able to profit from the illness of others. But the students interviewed in this article demonstrate a striking lack of understanding of basic economic principles.

Let's start with the medicines. Drug development is hugely expensive. Most drugs never make it to market, and many which do are never widely prescribed. To pay for all the costs of developing a drug--the huge number of man-hours of design, testing, revision, FDA approval, and all the failed attempts--the profit per successful drug needs to be very high, or else the companies wouldn't be financially viable. Also important to note is that the company is not benefiting from the illness; the company is economically benefiting from the treatment of that illness. If we remove patent protection from medicines, it will no longer be profitable to develop new drugs (the margins of producing a generic drug are not high enough to fund R&D), and we will get no better at treating any illness than we already are. How does that sound to you?

The same can be said to some extent about music. Popular songs can be accessed for free by your radio only because you become a target audience that advertisers are willing to gain access to. mp3s, coming as they do without advertisement revenues, will therefore require some economic benefit to their producers or else they won't be produced. At least, not anything like they are now. Garage bands and amateur groups would still probably make recordings, but studio recordings would be a thing of the past.

The same goes for visual artwork. Museums have to pay their curators, their utilities, maintenance and repair costs, etc. Some people will obviously contribute to them as charities, but either you need to have some sort of admission price, or substantial tax revenue allocated to them. If you rely on taxes, then you are charging everyone for a service only some are choosing to avail themselves of. That's not necessarily a bad things -- I'm highly in favor of public funding for libraries, for instance -- but it's something you need to be aware of.

At the end of the day, one of the students interviewed expressed the view that college is supposed to be separate from the rest of the world, and for the sharing and reusing of culture. The sharing of culture is certainly a part of college, but it's not the sole purpose by any means. One of the primary missions of higher education is supposed to be the development of critical thinking. I feel the students quotes in this article could use a bit more of that before they continue with their sharing and reusing of culture.

1 comment:

AdamX said...

Totally off subject:

What's your November Novel going to be about?