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October 1, 2006

Response to EFF on IPI's movie piracy study

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IPI has gotten a lot of media coverage on our new econometric study estimating the economic impact of movie piracy, including a pretty good story in the Washington Post by Frank Ahrens.

One thing in the Post story demands to be answered, however. In response to our argument that money lost to piracy has a detrimental impact on the U.S. economy, Jason Schultz of the Electronic Frontier Foundation says something that on the surface seems really wise, but after further examination is really, really stupid.

Here is Schultz's quote:

It's important to remember, however, that even though piracy prevents money from reaching the movie industry, those dollars probably stay in the economy, one intellectual property expert said.

"In other words, let's say people are forgoing paying for $6 billion in movies by downloading or consuming illegal goods but end up spending that $6 billion on iPods, computers and HDTV sets on which to watch the movies, which leads to $25 billion in job creation in the computer/software/consumer electronics field," Jason Shultz, staff lawyer at the Electronic Frontier Foundation, wrote in an e-mail.

This is really, really, mind-bogglingly stupid.

There are several things I could say about the quote, but the most important thing to point out is that if people spend on other consumer electronics all the money they "save" by stealing movies, they are creating jobs IN SOUTH KOREA AND CHINA, not in the United States. The whole point here is that the movie industry is one of the very few industries where the U.S. has a positive balance of trade with the rest of the world (even with rampant piracy). The point of the study was the harmful impact of piracy on the U.S. ECONOMY.

Of course, Schultz identifies himself as a lawyer, and not an economist, so why he is trying to make an economic point and why Ahrens quotes him as if he has anything useful to say about economics is beyond me.

One of the fun things about our study is that we have described in detail in the study the data, the assumptions and methodology used. I can't wait to see how people are going to attack this study. I predict there will be a bunch of eye-rolling, foaming-at-the-mouth criticism from the IP skeptics, but will any sound economist attack the methodology or assumptions?

That's the fun thing about doing work with integrity and that is actually empirical in nature, as opposed to just putting out jargon and rhetoric. It's a lot tougher to knock down empirical work that was done with integrity than it is to just fulminate. So much of what the free culture, IP skeptic crowd does is just fulminate and make assertions. They have no empirical data or analysis behind any of their assertions ("knowledge wants to be free," "patents kill people," "DRM is keeping public domain away from the public," "intellectual property is being used to enclose knowledge"). That kind of rot.

I'd like to see James Boyle, or Lawrence Lessig, or Jamie Love come up with one single empirical study that proves any of their points. ANY of them.

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