A copyright economy is a ‘waterfall’ economy

NOTE HXA7241 2012-01-03T10:08Z

Copyright has deep intrinsic inefficiency and makes the economy like a weak software development process.

Economic literature seems to discuss copyright efficiency in a rather limited way. It considers selling copies of things with copyright compared to . . . selling copies of things without or with different kinds of copyright. It is all about selling copies – as if information should always be made and sold in an old industrial factory mass-production way.

Let us step back and think about this somewhat from the mind of software development.


The basic structure of copyright-based commerce is this: the creator expends effort up front, then hopes buyers will pay later.

The information flow, or rather lack of it, creates a large risk of producing what is not wanted. It is commonly observed that many, or the majority of, products fail to recoup costs.

Also the copy restrictions necessarily raise prices far above the real marginal costs of near zero. That means there is a large potential value in access to the goods the public is prevented from realising (or, a large risk of not benefiting from what has been produced).

Such a structure consumes a scarce resource – creative effort – wastefully, and restricts an abundant resource – communicability of information – unnecessarily. That seems very much the opposite of economically efficient.


The economic problem here is fundamentally one of information and cooperation. As far as we know what we want we should share the cost of producing it (i.e. production should be of what is known to be wanted, and cooperation should be on shared goals). And where we do not know we should not prevent unpredicted gains from what has been produced.

The practical problem is how to get information and how to promote cooperation – this is where possible arrangements can vary. But the core theoretical structure is that our production should follow from information, and our consumption should not be hostage to lack of information – this is what all arrangements should do.


What does big effort up-front then big-bang delivery remind you of? ‘Waterfall’ – copyright induces the whole informational economy into a ‘waterfall’-like process.

In software, we have very much moved away from the limitations of such processes. We do not want to eschew information then risk a deeply wrong product at release. Instead we seek continual iterative adjustment so what we build follows good information on what is wanted. Also in software, we strongly incline to make the product free and open-source, so unplanned unimagined uses, and hence benefits, can arise and grow.

All informational ‘products’ are a form of software, in some substantial sense. Perhaps we should thoroughly reconsider the way our larger information-economy works according to what we have learned from software.