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Part I of this Article describes the economic models now proffered as the basis for defining rights in digital works, and explores their striking resemblance to the system of social ordering described and advanced in the Supreme Court's Lochner-era decisions. The ghost of Lochner is not invoked lightly, nor with intent to belittle. Lochner represented a particular ideal of social ordering, premised on a seamless convergence of the private-law institutions of property and contract to provide a zone of legal insulation for market outcomes. In the physical world, that vision has long been compromised by evidence of market failures that all but the most die-hard Chicago school economist cannot help but acknowledge. The cybereconomists' argument, in essence, is that cyberspace more closely approximates the conditions necessary for perfect markets, and that under these conditions, a legal regime based primarily or even exclusively on the private-law institutions of property and contract is appropriate. This argument, moreover, has found favor with government policymakers, who have used similar reasoning to frame legislative and treaty recommendations. It is both fair and important to ask whether en route to their conclusions, the cybereconomists have corrected the Lochner Court's methodological lapses, or simply reproduced them.

Part II demonstrates that the cybereconomists' debt to the social ideology of Lochner runs deep. Their proposals turn out to be grounded in identical beliefs about the conceptual primacy of private property and private ordering and the illegitimacy of "redistributive," market-distorting legislation. As a result, their models are neither scientific (in the sense of describing an ineluctable reality) nor neutral, but rather normative and contingent on the very same institutions and arrangements whose absolute efficiency they seek to prove. Their failure to conceive of contract as anything less than voluntary and (definitionally) private, or of property as anything less than complete control, blinds them to the socially constructed nature of the existing mass market for creative works and prevents them from seriously considering whether a regime based on limited ownership rights might be more effective at promoting access and progress. The author argues that in light of the special nature of creative and informational works and of creative and intellectual progress, there is substantial reason to believe that a limited-ownership regime is better suited to furthering these goals.

Part III begins the project of developing a stronger, more defensible economic model for digital intellectual property rights. As a tool for understanding information markets, the neoclassically-grounded economic theory to which the cybereconomists subscribe is fatally incomplete. In particular, critiques of the neoclassical paradigm supplied by institutional, welfare-theoretic, and political economists have identified several important factors that should inform efforts to determine the optimal system of rights in digital works. First, Part III explores the dynamics of bargaining power in the consumer mass market for creative and informational works and suggests that, in light of the predominantly reactive nature of consumers' power to affect markets, consumers are more likely to attain relative equality of bargaining power in the legislative arena. Part III then considers the relationship between the legal regime governing rights in digital works and overall social welfare. It demonstrates that allowing content owners to internalize the uncompensated benefits generated by creative and informational works under a limited-entitlements regime would result in underproduction of works that produce significant social benefits. The resulting decrease in social welfare must be offset against any increased value that would be realized through market exchange. The question whether such a regime would be preferable to the current one cannot be answered except by reference to a normative conception of social welfare. Moreover, this choice implicates preferences about the conditions of individual and social self-definition that are not capable of expression and effectuation through the market. In light of these considerations, it would be entirely rational to conclude that a regime of limited entitlements is optimal.

Finally, Part IV considers, and rejects, the cybereconomists' implicit contention that the relatively "frictionless" nature of transactions in cyberspace is a technological imperative that dictates redefining digital property rights in the neoclassical mold. Technology and society constitute each other; if we have not yet developed an alternative technological paradigm for defining and administering rights in digital works, it is because we have not been asking the right questions. I conclude that both the legal regime governing rights in digital works and the technology for implementing it should be determined with reference to expressly chosen social priorities. Under a broader conception of economic theory and of social welfare, society may legitimately choose to retain and institutionalize a limited-entitlements regime for digital works.

Publication Citation

97 Mich. L. Rev. 462-563 (1998)