# a blog about things that I've been thinking hard about

# Digital Copyright And The Argument From Guilt: Do You Care About Strangers More Than You Care About Your Friends?

10 February, 2012

A common argument against digital piracy is that unauthorized copying deprives content producers of income, so therefore we shouldn't pirate. This could be considered the argument from guilt. However, it can be shown that digital piracy always benefits the pirates more, financially, than it harms the copyright holder.

If copyright requires us to care more about copyright holders, who we don't know, than we care about our friends, who we do know, then no one will ever rationally choose not to pirate, because we all care more about our friends than we care about strangers.

The conclusion that the "guilt" argument, by itself, does not justify copyright, follows even if we do care about the "losses" that artists suffer due to piracy – because any guilt we might feel can be assuaged by making voluntary donations, which would still be cheaper than paying what copyright makes us pay.

by Philip Dorrell

## The Two Main Piracy Scenarios

Assume that you have a file on your computer which is a copy of commercial copyrighted content, which you may or may not have acquired "legitimately" (it doesn't matter which for the purposes of this analysis). This content might be a song album which is available for sale on iTunes (or any other commercial outlet – this article isn't particularly about iTunes).

Suppose further that you are considering whether or not to give a copy of that file to a friend of yours. If you do give your friend a copy, he gets it for free. But if both of you respect the copyright of the copyright-holder, and he wants to get a copy, then he will have to pay for it, e.g. by buying it from iTunes.

To get some specific figures, let's make some assumptions:

- The album is available on iTunes, and it costs $10 to buy.
- The artist receives payment directly from Apple, subject only to Apple's "cut", which is generally 30%. The artists receives $7 for every "legitimate" copy sold.

In considering the costs and benefits of piracy, there are two distinct scenarios to consider, based on whether or not your friend would value the album at more or less than the purchase price:

1. If he considers the album to be worth $10 or more, and he couldn't pirate a copy, he would buy it from iTunes.
2. If he doesn't consider the album to be worth $10, perhaps because he doesn't like the album that much, or he doesn't have that much money to spend on digital music, or some combination of those reasons, then he wouldn't buy it from iTunes.

We can argue about what proportion of real-world piracy is the first case (where a "sale is lost"), and what proportion is the second (where there wouldn't have been any sale anyway). But for the purposes of this discussion, the actual proportions don't matter, as I consider both cases separately, and I show that the benefits of piracy to your friend exceed the costs of piracy to the artist in both cases.

### Your friend would have bought a copy ...

Let us assume that your friend would have bought a copy at $10, perhaps because he considers owning a copy of the album to be worth more than $10. To give ourselves a specific number to work with, assume that he values the album at $12. That is, if he really had no other choice, he would pay as much as $12 to buy it. This $12 of value gets divided up as follows:

- $7 paid to the artist,
- $3 paid to Apple (effectively the cost of making the sale),
- $2 of surplus value which is the difference between the $12 value and the $10 price.

Now let's consider what happens if your friend gets a copy from you, for $0:

- The artist loses $7,
- Your friend gains $10.
- Apple doesn't get $3 (but we don't care about that, because in this case Apple didn't do anything).

Thus we see that your friend has gained $3 more than the artist has lost.

In this scenario, to care enough to decide not to pirate, you would have to care more about the artist losing $7 than you would care about your friend gaining $10.

### Your friend wouldn't have bought a copy ...

For the second scenario, your friend values owning a copy of the album less than $10. To have a specific number to work with, let's assume he values owning a copy of the album at $6. So if the only way he could get a copy of the album is to buy it for $10 from iTunes, he won't buy it, because it won't be worth it.

Now let's consider what happens if your friend gets a copy from you, for $0:

- The artist loses $0, because the sale never would have occurred anyway.
- Apple is unaffected (because the sale wouldn't have happened)
- Your friend gains an effective consumer surplus of $6.

Thus, in this case, your friend has gained $6 more of value than the copyright holder has lost.

In this scenario, there is no reason at all to feel guilty about the artist, because the artist has lost nothing. The only reason not to pirate, in this case, is that you care about copyright, perhaps as a matter of principle. And I'm guessing that hardly anybody cares about copyright that much.

(Of course one can be a little cynical, and suggest that some people who say "I wouldn't have bought it anyway" actually would have bought a copy if that really was the only way they could have acquired a copy.)

## But What If You Do Feel Guilty?

In either of these two scenarios, you and your friend might feel very guilty about not paying the artist anything at all.

Let us suppose that there exists some system of voluntary donation, which can be used by people who pirate content and feel guilty about depriving artists of income.

There probably will be some transation cost associated with such a system, but it won't be as much as the 30% charged by Apple.

Let us assume that the transaction cost is $0.50 per donation, i.e. 50 cents.

We can consider each of the two main scenarios, and decide what size of voluntary donation your friend might pay to the artist in each scenario.

### Your friend would have bought a copy ...

In this case the artist lost $7 due to the act of piracy, and to fully compensate the artist for this loss, your friend will have to pay the artist $7, which will actually cost him $7.50.

In this scenario, the costs and benefits are:

- The artist receives exactly the same payment, i.e. $7, so she loses $0.
- Your friend gains $2.50 (the difference between Apple's cut from a legitimate sale, and the $0.50 transaction cost of voluntary donation system)
- Apple gets $3 less (but they didn't do anything)
- The company running the voluntary donation system gets $0.50 (but this mostly just covers their expenses, and we don't actually care about this company, just like we don't care about Apple).

### Your friend wouldn't have bought a copy ...

In this case, your friend might decide that he doesn't feel guilty about pirating, because he knows he wouldn't have bought a copy anyway, so the artist wouldn't have received any money from him, and she still doesn't receive any money when he pirates her content.

Alternatively your friend might feel that the artist deserves something, since he has gained some benefit from her efforts. Let us suppose he decides to pay the artist $2, which actually costs him $2.50.

This time, the costs and benefits, relative to the "legitimate sale" scenario, where actually no sale happened at all, are:

- The artist receives $2, which is $2 more than $0.
- Your friend receives a $6 value for payment of $2.50, with a net surplus value of $3.50.

## Comparison: Copyright Versus Unlimited Piracy + Voluntary Donations

We can only speculate as to how much consumers would actually pay in voluntary donations if such a voluntary donation scheme existed. They might actually not pay much at all.

But the point is, if people cared as much about "losses" to artists as those who argue against piracy hope that they cared, then an unlimited piracy and voluntary donation system would create more value for both artists and consumers, as compared to a perfectly enforced copyright system.

So if we try to argue that each individual person should respect copyright, based on the benefits of copyright to that individual, we will fail.

And if we try to argue that each individual person should respect copyright, based on the benefits of copyright to that individual, and on the concern that the individual should feel about how the "losses" of piracy affect artists, we will also fail.

## Scenario Variations: Friends Versus Strangers

In the example above, I considered piracy occurring between you and a friend.

We could also consider scenarios where you pirate content with other strangers.

There is not so much reason to care about the benefits of piracy to other pirates who are people that you don't know.

But, you can consider the benefits in terms of the scenario when you are the one receiving the free copies of content (so the question is: do you care more about the copyright-holder than you care about yourself?, to which the answer will presumably always be: "No").

You can also consider piracy with strangers in terms of mutual benefit. That is, you care about their benefits from piracy, because they care about your benefits from piracy.

Either way of looking at it, the overall benefits of piracy are something that you will care about more than you will care about the "losses" due to piracy suffered by the artists.

## As An Artist, Copyright Motivates Your "Fans" To Conspire Against You

If you are an artist, and there are strangers mutually pirating your copyrighted content with each other, what that means is that your fans are conspiring to carry out an activity which benefits them, and costs you. (And which, in total, always benefits them more than it costs you.)

If you think that the "argument from guilt" could somehow be used to make your fans decide not to pirate your content, then, as I have explained in the article so far, you will fail.

If your only weapon against piracy by your fans is the "argument from guilt", then a more rational approach is the following:

- Give explicit consent to your fans to "pirate" your content to an unlimited degree.
- Ask your fans to give you voluntary donations, due to the fact that you are not receiving money any other way. (This will necessarily involve you either setting up a voluntary donation scheme for yourself, or joining some existing voluntary donation scheme.)

## Appendix: Would A Voluntary Donation Scheme Give Everyone A "Fair Deal"?

The main point of this article is to consider the "argument from guilt", and to compare copyright to unlimited piracy with voluntary donations.

The point of this appendix is to consider yet another alternative to copyright, which is not entirely voluntary, and which may be superior both to copyright and to voluntary donations as mechanisms for paying artists.

Nobody really knows where we are all going to end up when the "copyright wars" have finished. Probably we won't be living in a world of perfectly enforced copyright. Probably we will be living in a world private unauthorised copying of copyrighted digital content cannot be prevented at all.

It may be that the only sources of income to artists, derived entirely from the production of digital content, will be voluntary donations. (We can consider things like concert ticket sales, but selling concert tickets is selling something different to digitial content, and may or may not work as a major source of additional income for different artists. For other types of digital content, like books, "concerts" aren't even a reasonable possibility.)

However there are some obvious problems with relying entirely on voluntary donations for income, mostly to do with "free-riding". In fact there are two basic free-riding scenarios that will occur:

- Some fans make voluntary donations, and other fans don't. The fans who don't donate are free-riding on the fans who do donate.
- None of your fans make voluntary donations. In which case you (the artist) are forced to bear all the costs of creating your content, and all of your fans are free-riding on you.

Given these difficulties, we could retreat back to copyright. Except we already know that it isn't going to work.

Or, we could consider the possibility of making a "voluntary" donation scheme slightly less voluntary.

### An "Involuntary" Voluntary Donation Scheme ...

An "involuntary" voluntary donation scheme would be like a "voluntary" donation scheme, except, somehow the voluntary donations would actually be involuntary. This might work by everyone in society deciding that there is some amount of money which everyone should contribute to a donation scheme for artists who create digital content (or to anyone who creates digital content), especially for digital content which is licensed for free distribution. This involuntary "donation" would in effect be a "content tax". (It might be levied on content-related technologies and services, like computers, and internet subscriptions. Or it might just come out of general taxation.)

And then, somehow (and this is not a completely trivial problem to solve), having collected some funds to give to artists as "donations", society would decide as a whole how much each artist "deserves" to be paid from those funds, taking into account the benefit derived from the digital content which that artist has created and published (and which benefits everyone in society, because we are living in a world where all published digital content is freely available to everyone who wants it).

### How much funds should go into the "donation fund"?

In the world of copyright, how much to pay is decided by how much consumers are willing to pay.

In an involuntary voluntary donation scheme, there has to be a decision up-front about how much money to collect. (Although this decision can be constantly revised, for example on an annual basis.)

A reasonable starting point for how much money to decide to put into a donation fund is how much money people currently pay for copyrighted content, or, if we consider that piracy has already caused undesirable reductions in the amount of content produced (which may not necessarily be the case), how much people used to pay for copyrighted content.

Assuming that the system can be run in such a manner that transaction costs are less than current digital content transaction costs (i.e. less then Apple's 30%), then the amount of money available to pay to artists in return for their efforts to create content should be more than what they are getting now.

At the same time, in return for this same amount of money, consumers will receive access to all published digital content, which is much more than they can currently access legitimately (i.e. more than they can currently access for that amount of money, especially for those consumers who do not pirate, and who therefore only ever access content that they actually pay for).

So potentially, a system of unlimited piracy and involuntary donations could work better than either the current copyright system, or, a system of unlimited piracy and only voluntary donations.

So such a system is at least worth thinking about.

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