Arnold Kling

Abolish the Music Industry?

Arnold Kling, Great Questions of Economics
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Paul Romer estimates that by not providing free downloads, the music industry may be imposing a deadweight loss on consumers that exceeds the revenue for the entire industry. In this article, which can only be downloaded free if you are a member of the American Economics Association, Romer says,

Current copyright law means that recordings are financed, in effect, by a commodity tax with the tax revenue flowing directly to the producing firm in proportion to the number of copies it sells is economically and technically feasible to design a system that uses general tax revenue to reward people who produce such goods as musical recordings. The rewards coudl be proportional to the number of copies consumers select, so that market demand still allocates funds between alternative artists and recordings.

As other music distribution vehicles become more efficent than CD's, the attempt to use copyright law to prop up the CD industry becomes more and more outrageous. Romer suggests that a form of socialism could be more efficient. He bases this hypothesis on a paper by Steven Shavell and Tanguy van Ypersele. My article listen to the technology offers a private-sector alternative to solving the problem for music.

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