Economic Analysis and Copyright Law: Are New Models Needed in the Digital Age?

Abstract

Summary Economic analysis has played a central role in the development of intellectual property policy. Since information exhibits characteristics of a public good, both non-rival consumption and non-exclusivity, information markets are prone to market failure. This requires a policy response in the form of a subsidy or direct government provision. The monopoly rights granted to owners of intellectual property can be viewed as a form of subsidy intended to avert market failure. But in the digital environment, the tendency to market failure increases as information is more susceptible to copying and distribution with neither significant additional cost nor loss of quality. While a wide range of policy tools are available to meet the challenges of the new digital environment, the range of current legislative proposals shows that the expansion of property rights in information is the only approach being given serious consideration. This paper reviews these proposals as well as the wide variety of other approaches that could be considered including an increased role for the public provision of information. It is concluded that the traditional model of positive economic analysis is unable to explain the current policy environment and that a broader approach rooted in political economy would be appropriate.