Lochner in Cyberspace: The New Economic Orthodoxy of 'Rights Management'

Abstract

The economic vision embodied in Lochner v. New York is alive and well on the digital frontier. Its premises ? the sanctity of private and freedom of contract, the sharply delimited role of public policy in shaping private transactions, and the illegitimacy of laws that have redistributive effects ? undergird a growing body of argument and scholarship concerning the relative superiority (as compared with copyright) of common law and rules for protecting and disseminating digital works. In contemporary incarnation, these premises are embedded in the rhetoric of economic efficiency. Their proponents argue that because digital networks reduce destroying transaction costs, the most efficient legal regime, measured by its success at inducing the creation of digital works and increasing consumers? access to information, is that which permits copyright owners to maximize control over the terms and conditions of access to and use of their digital property. The article argues that the economic case for enhanced author/owner control is overly simplistic and unconvincing. It is based on an essentialism about the nature of contract and market that is manifestly unsuited to mass-market transactions, on a reflexive and unsubstantiated distrust of the legislative process as compared with the market, and on assumptions about the nature of property and the best ways of managing it that are wholly unproven and arguably unjustified in the case of creative works. Given the public good nature of creative and informational works and the unpredictable pathways of creative progress, there is every reason to believe that a limited-ownership regime is better, not worse, at maximizing digital works? value. Certainly, the proponents of a private-law approach to digital intellectual rights have not met burden of showing otherwise. The article then lays the foundation for a more sophisticated economic model of information markets and digital intellectual rights. Drawing upon insights supplied by institutional, welfare-theoretic, and neo-Marxian economics, it argues that: (1) at least where non-price terms are concerned, consumers of mass marketed digital works are more likely to experience a relative equality of bargaining power vis-a-vis content owners in the legislative arena than in the market; (2) allowing content owners to internalize the uncompensated benefits generated by creative and informational works under the current limited entitlements regime likely would result in underproduction of those works that produce significant shared social benefits; and (3) the choice between such a regime and the current one implicates preferences about the conditions of individual and social self-definition that are not capable of expression and effectuation through the market. Much work remains to be done in each of these areas. However, the article concludes that under a broader conception of economic theory and of social welfare, society may legitimately choose to adopt and institutionalize a regime of limited entitlements in digital works.