Digital rights management sucks

Cartoon by Rayma, originally in reference to Venezuelan politics.

The free market works when participants in the market are rewarded in proportion to the amount of good they contribute. With DRM this proposition is reversed. Society gains less benefit from a protected work, but the owner of the work gets more reward. (Or so they hope.) On top of that, copy protection mechanisms invariably provide a less useful product even to the paying customers. This helps explains why DRM is so universally reviled.

The crux of the problem is that traditional economics states that the price of goods in a competitive free market should approach the marginal cost to produce them. This works nicely for manufactured goods like cars, where the cost of capital, like factory equipment, can be amortized over large numbers of the manufactured product. For digital goods, the marginal cost approaches zero and the traditional economic model stops working.

Consider, also, the difference between rival and nonrival goods. To understand rival goods, imagine you want to build a house on a piece of empty land. Someone else wants to turn that land into a farm. Only one of those two uses can be accommodated. Either you or the farmer will have to outbid each the other for the use of the land. The theory goes that this competition will tend toward the most efficient use of scarce resources. But nonrival goods, for example information, can be put to an unlimited number of uses. Copying information is usually very easy compared to the effort of deriving the information in the first place, whether we're talking about a scientific theory or a piece of music. This creates a situation in which the most benefit is had by copying the information as widely as possible, yet it's very hard for the original creator to capture much of the wealth he has created. This is a very real dilemma, but the solution favored by intellectual property rights advocates - that of creating scarcity where no natural scarcity exists - sacrifices some fraction of the utility that would otherwise be gained in order to increase the portion that property holders can capture.

The publishing industry has set itself up as a middleman between the real content providers and consumers. They seek to use legislation to preserve this privileged position. A truly free-market approach would be to allow the middlemen to be made obsolete. This is what will happen eventually, the efforts of our toadying crony capitalist government notwithstanding.

We need to find market mechanisms that more closely align reward with contribution for the real content providers, the creative people. This is a tricky problem with no obvious solutions. For now, we'll have to put up with a lot of stupidity because so few people even clearly understand the problem.