How copyright is like Solyndra

I’m working on a project looking at libertarian views on copyright (more on that soon), and I’d like to solicit your feedback on an analogy I’m developing. I’ve set up a comment thread at Google+ and I’d sincerely appreciate your thoughts on this post. Email feedback is also appreciated. Here goes…

Libertarians, conservatives and other supporters of a free market tend to be critical of government programs that subsidize particular industries. For example, the loan guarantees that allowed Solyndra to set up shop. We don’t like them because they distort the market and tend to lead to rent-seeking, if not corruption.

Why do we have loan guarantees for renewable energy projects like Solyndra’s solar power technology? Quite simply it’s because we’d like to see more renewable energy technology developed; more than is profitable to develop right now. So, the government offers a subsidy to incentivize the creation of such technology, which will eventually benefit the public at large. So far so good, but there are problems with this kind of government privilege.

First, there is a knowledge problem. How do we know that we’re not already getting the right amount of investment in renewable technologies? Without a government subsidy, there would still be investment in renewable energy technologies. We just think it’s not enough. But even putting aside how we can know that, the other question is, how much investment is optimal? Without a market process to guide investment, we don’t know how much is enough. So when the government offers subsidies, it’s guessing. It’s likely offering too little or too much, with each error introducing its own inefficiencies.

Second, the process by which we decide how much subsidy to offer, and to whom it is granted, is a political one. Congress decides how much is enough. It also picks winners and losers (renewable over nuclear, solar over geothermal). The result is rent-seeking, which is not only wasteful, but it almost guarantees that we won’t answer anywhere near correctly the questions of whether to subsidize, what to subsidize, and by how much.

So, given that the above argument is obvious to libertarians and conservatives, I would think they should be just as skeptical of copyright as they are of renewable energy loan guarantee programs.

Without copyright, there would still be books and songs written and movies made. It’s just that we think there wouldn’t be enough. So, the government offers a subsidy in the form of a monopoly over one’s creations in order to incentivize more creative output. (To be clear, the government is not recognizing an existing property right, it is granting a privilege. Please see Tom Bell on this point here and here.) The same questions we have about renewable energy present themselves here: How do we know we wouldn’t have “enough” creative works without copyright? And assuming we know that, how do we know the right amount of incentive to offer? Is a 14 year term, as the Founders legislated, enough? Is life of the author plus 70 years too much?

More worryingly to conservatives and libertarians, it is Congress who decides these questions. It decides how much protection to grant, and it picks winners and losers (music over fashion, composers over performers). As a result, we see in copyright some of the most transparent rent-seeking on display in Washington. A concentrated content industry seeks longer and longer terms, and greater and greater protections and enforcement, at the expense of a dispersed public. It’s a recipe for giant inefficiency and massive loss of consumer welfare.

The Constitution explicitly grants Congress the power to establish a postal service, and Congress does this by granting to the USPS a monopoly privilege (not property, I hope we can agree) to delivering first class mail and using mailboxes. Libertarians and conservatives have long understood that although Congress has the power to do this, it might want to reconsider how it exercises that power. The USPS we have is a bloated and inefficient government program, and substituting competition for monopoly would no doubt increase efficiency and consumer welfare. We know this even though we understand that with half a million career employees at the USPS, the public choice dynamic at work might keep Congress from forbearing on its power.

Libertarians and conservatives should see copyright the same way. Although the Constitution gives Congress the power to grant monopoly rights to authors, it is not required to exercise that power. Given the concentrated benefits and dispersed costs inherent in such a system of monopoly grants, copyright has similarly become a bloated and inefficient government program. We should be as skeptical of copyright as we are of Solyndra or the USPS.

What do you think of my analogy? Please let me know here.