Category Archives: Economics

Lombard Street: A Description of the Money Market by Walter Bagehot

A few weeks ago I had the pleasure to read Lombard Street: A Description of the Money Market by Walter Bagehot (1873, my edition a reprint of the 1910 Dutton Edition). Insightful, incisive and straightforwardly written in the kind of limpid but expressive prose that seems to have gone out with the 19th century. It also includes some very useful data points, some of which are included in the excerpts below.

Excerpts from the [Gutenberg version]( http://www.gutenberg.org/cache/epub/4359/pg4359.html) (not clear what edition but checked against my copy). All emphasis added.

Dividends of Banks (p.39)

This is the natural desire of all directors to make a good dividend for their shareholders. The more money lying idle the less, caeteris paribus, is the dividend; the less money lying idle the greater is the dividend. And at almost every meeting of the proprietors of the Bank of England, there is a conversation on this subject. Some proprietor says that he does not see why so much money is kept idle, and hints that the dividend ought to be more.

Indeed, it cannot be wondered at that the Bank proprietors do not quite like their position. Theirs is the oldest bank in the City, but their profits do not increase, while those of other banks most rapidly increase. In 1844, the dividend on the stock of the Bank of England was 7 per cent, and the price of the stock itself 212; the dividend now is 9 per cent, and the price of the stock 232. But in the same time the shares of the London and Westminster Bank, in spite of an addition of 100 per cent to the capital, have risen from 27 to 66, and the dividend from 6 per cent to 20 per cent.[^1] That the Bank proprietors should not like to see other companies getting richer than their company is only natural.

[^1]: In 1905 the Bank of England paid a dividend of 9 per cent, and the London and Westminster Bank a dividend of 13 per cent. At the end of 1905 the sshares ofthe Bank of England were quoted at 293.5 and the those of the London and Westminster Bank at 58.

Some part of the lowness of the Bank dividend, and of the consequent small value of Bank stock, is undoubtedly caused by the magnitude of the Bank capital; but much of it is also due to the great amount of unproductive cash—of cash which yields no interest—that the Banking Department of the Bank of England keeps lying idle. If we compare the London and Westminster Bank—which is the first of the joint-stock banks in the public estimation and known to be very cautiously and carefully managed—with the Bank of England, we shall see the difference at once. The London and Westminster has only 13 per cent of its liabilities lying idle. The Banking Department of the Bank of England has over 40 per cent. So great a difference in the management must cause, and does cause, a great difference in the profits. Inevitably the shareholders of the Bank of England will dislike this great difference; more or less, they will always urge their directors to diminish (as far as possible) the unproductive reserve, and to augment as far as possible their own dividend.

Origin of Banking in Ensuring Currency Quality (pp. 80-82)

The real history is very different. New wants are mostly supplied by adaptation, not by creation or foundation. Something having been created to satisfy an extreme want, it is used to satisfy less pressing wants, or to supply additional conveniences. On this account, political Government—the oldest institution in the world—has been the hardest worked. At the beginning of history, we find it doing everything which society wants done, and forbidding everything which society does not wish done. In trade, at present, the first commerce in a new place is a general shop, which, beginning with articles of real necessity, comes shortly to supply the oddest accumulation of petty comforts. And the history of banking has been the same. The first banks were not founded for our system of deposit banking, or for anything like it. They were founded for much more pressing reasons, and having been founded, they, or copies from them, were applied to our modern uses.

The earliest banks of Italy, where the name began, were finance companies. The Bank of St. George, at Genoa, and other banks founded in imitation of it, were at first only companies to make loans to, and float loans for, the Governments of the cities in which they were formed. The want of money is an urgent want of Governments at most periods, and seldom more urgent than it was in the tumultuous Italian Republics of the Middle Ages. After these banks had been long established, they began to do what we call banking business; but at first they never thought of it. The great banks of the North of Europe had their origin in a want still more curious. The notion of its being a prime business of a bank to give good coin has passed out of men’s memories; but wherever it is felt, there is no want of business more keen and urgent. Adam Smith describes it so admirably that it would be stupid not to quote his words:—’The currency of a great state, such as France or England, generally consists almost entirely of its own coin. Should this currency, therefore, be at any time worn, clipt, or otherwise degraded below its standard value, the state by a reformation of its coin can effectually re-establish its currency. But the currency of a small state, such as Genoa or Hamburgh, can seldom consist altogether in its own coin, but must be made up, in a great measure, of the coins of all the neighbouring states with which its inhabitants have a continual intercourse. Such a state, therefore, by reforming its coin, will not always be able to reform its currency. If foreign bills of exchange are paid in this currency, the uncertain value of any sum, of what is in its own nature so uncertain, must render the exchange always very much against such a state, its currency being, in all foreign states, necessarily valued even below what it is worth.

‘In order to remedy the inconvenience to which this disadvantageous exchange must have subjected their merchants, such small states, when they began to attend to the interest of trade, have frequently enacted, that foreign bills of exchange of a certain value should be paid, not in common currency, but by an order upon, or by a transfer in, the books of a certain bank, established upon the credit, and under the protection of the state, this bank being always obliged to pay, in good and true money, exactly according to the standard of the state. The banks of Venice, Genoa, Amsterdam, Hamburgh and Nuremburg, seem to have been all originally established with this view, though some of them may have afterwards been made subservient to other purposes. The money of such banks, being better than the common currency of the country, necessarily bore an agio, which was greater or smaller, according as the currency was supposed to be more or less degraded below the standard of the state. The agio of the bank of Hamburgh, for example, which is said to be commonly about fourteen per cent, is the supposed difference between the good standard money of the state, and the clipt, worn, and diminished currency poured into it from all the neighbouring states.

‘Before 1609 the great quantity of clipt and worn foreign coin, which the extensive trade of Amsterdam brought from all parts of Europe, reduced the value of its currency about 9 per cent below that of good money fresh from the mint. Such money no sooner appeared than it was melted down or carried away, as it always is in such circumstances. The merchants, with plenty of currency, could not always find a sufficient quantity of good money to pay their bills of exchange; and the value of those bills, in spite of several regulations which were made to prevent it, became in a great measure uncertain.

‘In order to remedy these inconveniences, a bank was established in 1609 under the guarantee of the City. This bank received both foreign coin, and the light and worn coin of the country at its real intrinsic value in the good standard money of the country, deducting only so much as was necessary for defraying the expense of coinage, and the other necessary expense of management. For the value which remained, after this small deduction was made, it gave a credit in its books. This credit was called bank money, which, as it represented money exactly according to the standard of the mint, was always of the same real value, and intrinsically worth more than current money. It was at the same time enacted, that all bills drawn upon or negotiated at Amsterdam of the value of six hundred guilders and upwards should be paid in bank money, which at once took away all uncertainty in the value of those bills. Every merchant, in consequence of this regulation, was obliged to keep an account with the bank in order to pay his foreign bills of exchange, which necessarily occasioned a certain demand for bank money.’

Appointment of the Governor (& comments on the French Manner of Doing Things) (pp. 231)

… In France the difficulty of finding a good body to choose the Governor of the Bank has been met characteristically. The Bank of France keeps the money of the State, and the State appoints its governor. The French have generally a logical reason to give for all they do, though perhaps the results of their actions are not always so good as the reasons for them. The Governor of the Bank of France has not always, I am told, been a very competent person; the Sub-Governor, whom the State also appoints, is, as we might expect, usually better. But for our English purposes it would be useless to inquire minutely into this. No English statesman would consent to be responsible for the choice of the Governor of the Bank of England. After every panic, the Opposition would say in Parliament that the calamity had been ‘grievously aggravated,’ if not wholly caused, by the ‘gross misconduct’ of the Governor appointed by the ministry. Or, possibly, offices may have changed occupants and the ministry in power at the panic would be the opponents of the ministry which at a former time appointed the Governor. In that case they would be apt to feel, and to intimate, a ‘grave regret’ at the course which the nominee of their adversaries had ‘thought it desirable to pursue.’ They would not much mind hurting his feelings, and if he resigned they would have themselves a valuable piece of patronage to confer on one of their own friends. No result could be worse than that the conduct of the Bank and the management should be made a matter of party politics, and men of all parties would agree in this, even if they agreed in almost nothing else.

I am therefore afraid that we must abandon the plan of improving the government of the Bank of England by the appointment of a permanent Governor, because we should not be sure of choosing a good governor, and should indeed run a great risk, for the most part, of choosing a bad one.

Echoes of Today’s Extensive Attention to Deliberations of the “Fed” of the MPC (p. 243)

It has been said, with exaggeration, but not without a basis of truth, that if the Bank directors were to sit for four hours, there would be ‘a panic solely from that.’ ‘The court,’ says Mr. Tooke, ‘meets at half-past eleven or twelve; and, if the sitting be prolonged beyond half-past one, the Stock Exchange and the money market become excited, under the idea that a change of importance is under discussion; and persons congregate about the doors of the Bank parlour to obtain the earliest intimation of the decision.’ And he proceeds to conjecture that the knowledge of the impatience without must cause haste, if not impatience, within. That the decisions of such a court should be of incalculable importance is plainly very strange.

Profitability of Banks and its Cause (pp. 247-248)

‘But the main source of the profitableness of established banking is the smallness of the requisite capital. Being only wanted as a “moral influence,” it need not be more than is necessary to secure that influence. Although, therefore, a banker deals only with the most sure securities, and with those which yield the least interest, he can nevertheless gain and divide a very large profit upon his own capital, because the money in his hands is so much larger than that capital.

‘Experience, as shown by plain figures, confirms these conclusions. We print at the end of this article the respective profits of 110 banks in England, and Scotland, and Ireland, being all in those countries of which we have sufficient information—the Bank of England excepted. There are no doubt others, but they are not quoted even on local Stock Exchange lists, and in most cases publish no reports. The result of these banks, as regards the dividends they pay, is—

                               No. of Companies    Capital (L)
    Above 20 per cent             15                5,302,767
    Between 15 and 20 per cent    20                5,439,439
       " 10 and 15 per cent       36               14,056,950
       " 5 and 10 per cent        36               14,182,379
    Under 5 per cent               3                1,350,000
                           -----------------------------------
                                 110               40,331,535

that is to say, above 25 per cent of the capital employed in these banks pays over 15 per cent, and 62 1/2 per cent of the capital pays more than 10 per cent. So striking a result is not to be shown in any other joint stock trade.

Management and Supervision of Banks (pp. 262-263)

And an effectual supervision by the whole board being impossible, there is a great risk that the whole business may fall to the general manager. Many unhappy cases have proved this to be very dangerous. Even when the business of joint stock banks was far less, and when the deposits entrusted to them were very much smaller, a manager sometimes committed frauds which were dangerous, and still oftener made mistakes that were ruinous. Actual crime will always be rare; but, as an uninspected manager of a great bank has the control of untold millions, sometimes we must expect to see it: the magnitude of the temptation will occasionally prevail over the feebleness of human nature. But error is far more formidable than fraud: the mistakes of a sanguine manager are, far more to be dreaded than the theft of a dishonest manager. Easy misconception is far more common than long-sighted deceit. And the losses to which an adventurous and plausible manager, in complete good faith, would readily commit a bank, are beyond comparison greater than any which a fraudulent manager would be able to conceal, even with the utmost ingenuity. If the losses by mistake in banking and the losses by fraud were put side by side, those by mistake would be incomparably the greater. There is no more unsafe government for a bank than that of an eager and active manager, subject only to the supervision of a numerous board of directors, even though that board be excellent, for the manager may easily glide into dangerous and insecure transactions, nor can the board effectually check him.

Bill-broker commissions and operations (pp. 287-288)

As is usually the case, this kind of business has grown up only gradually. In the year 1810 there was no such business precisely answering to what we now call bill-broking in London. Mr. Richardson, the principal ‘bill-broker’ of the time, as the term was then understood, thus described his business to the ‘Bullion Committee:’

Mr. Richardson was only a broker who found money for bills and bills for money. He is further asked:

‘Do you guarantee the bills you discount, and what is your charge per cent?—No, we do not guarantee them; our charge is one-eighth per cent brokerage upon the bill discounted, but we make no charge to the lender of the money.

‘Do you consider that brokerage as a compensation for the skill which you exercise in selecting the bills which you thus get discounted?—Yes, for selecting of the bills, writing letters, and other trouble.

‘Does the party who furnishes the money give you any kind of compensation?—None at all.

‘Does he not consider you as his agent, and in some degree responsible for the safety of the bills which you give him?—Not at all.

‘Does he not prefer you on the score of his judging that you will give him good intelligence upon that subject?—Yes, he relies upon us.

‘Do you then exercise a discretion as to the probable safety of the bills?—Yes; if a bill comes to us which we conceive not to be safe, we return it.

‘Do you not then conceive yourselves to depend in a great measure for the quantity of business which you can perform on the favour of the party lending the money?—Yes, very much so. If we manage our business well, we retain our friends; if we do not, we lose them.’

Public Debt, Public Finances and OpenSpending

Excerpts and commentary on Niall Ferguson’s first Reith Lecture. All emphasis added.

In reading this piece I thought constantly of the Open Spending project where we are endeavouring to collect together government (and other public) financial information from around the world and present it in an understandable way. In particular, it made me wonder whether we should try to do more beyond collection and presentation of the data to provide additional (necessarily somewhat speculative computations) such as proper financial balance sheets.

Fraudulent and inaccurate public finances

The present system is, to put it bluntly, fraudulent. There are no regularly published and accurate official balance sheets. Huge liabilities are simply hidden from view.

Not even the current income and expenditure statements can be relied upon in some countries. No legitimate business could possible carry on in this fashion.

The last corporation to publish financial statements this misleading was Enron.

There is, in fact, a better way. Public sector balance sheets can – and should be – drawn up so that the liabilities of governments can be compared with their assets.

That would help clarify the difference between deficits to finance investment and deficits to finance current consumption. Governments should also follow the lead of business and adopt the Generally Accepted Accounting Principles.

And, above all, generational accounts should be prepared on a regular basis to make absolutely clear the inter-generational implications of current policy.

US liabilities

The most recent estimate for the difference between the net present value of federal government liabilities and the net present value of future federal revenues is $200 trillion, nearly thirteen times the debt as stated by the U.S. Treasury.

Notice that these figures, too, are incomplete, since they omit the unfunded liabilities of state and local governments, which are estimated to be around $38 trillion.

These mind-boggling numbers represent nothing less than a vast claim by the generation currently retired or about to retire on their children and grandchildren, who are obligated by current law to find the money in the future, by submitting either to substantial increases in taxation or to drastic cuts in other forms of public expenditure.

Scape-goating

As our economic difficulties have worsened, we voters have struggled to find the appropriate scapegoat.

We blame the politicians whose hard lot it is to bring public finances under control, but we also like to blame bankers and financial markets, as if their reckless lending was to blame for our reckless borrowing. [ed: but bankers often engaged in efforts to enable and prolong reckless borrowing, and this included heavy lobbying to prevent effective regulation, after all one of the roles of the State is to help its citizens avoid bad decisions]

We bay for tougher regulation, though not of ourselves.

Talking at Legal Aspects of Public Sector Information (LAPSI) Conference in Milan

This week on Thursday and Friday I’ll be in Milan to speak at the 1st LAPSI (Legal Aspects of Public Sector Information) Primer & Public Conference.

I’m contributing to a “primer” session on The Perspective of Open Data Communities and then giving a conference talk on Collective Costs and Benefits in Opening PSI for Re-use in a session on PSI Re-use: a Tool for Enhancing Competitive Markets where I’ll be covering work by myself and others on pricing and regulation of PSI (see e.g. the “Cambridge Study” and the paper on the Economics of the Public Sector of Information).

Update: slides are up.

Community, Openness And Technology

PSI: Costs And Benefits Of Openness

Copyright is a Monopoly! (And isn’t like normal property)

The equation of ‘intellectual property’ (IP) such as copyright with (traditional “real”) property is frequently made, especially by those advocating its extension. However, this equation is fundamentally erroneous and results in very serious misapprehension of the nature and effect of IP. In particular, patents and copyright confer monopolies in a way that ownership of real property does not.

How is it different?

‘Real’ property like an apple, a car or an acre of land can only ever be used by one person/entity at one time — in economist’s terminlogy they are ‘rival’ goods. Giving someone exclusive rights over them therefore does no harm — only one person can have it and via trade we can ensure the person who values it most ends up with it 1. Here, creating property rights leads to an efficient outcome (at least in our simple case — in more complex setups we would need to think about complementarities, transaction costs etc).

By contrast, a copyright in, for example, a particular text confers not simply control over this or that particular book containing the text but over every instance of such a book. This is the very essence of a monopoly: being sole supplier of some good!

And it has all of the standard consequences of the monopoly: prices rise relative to what they would have been and access is reduced relative to its efficient level in which the price equals the cost of reproduction (i.e. we have a “deadweight” loss).

Furthermore, this cost of monopoly can be particularly serious when we have extensive “reuse” — i.e. new work builds upon old — as the monopoly inhibits not only access by users but the creation of new creative work.

The difference then between “normal” property and “intellectual property” is the difference between giving someone control of one apple (the apple they bought say) and control of all apples. The latter results in significant harm and inefficiency while the former does not.

Now, of course, the fact copyright is a monopoly does not mean it is per se bad. After all, we are deeply concerned with the incentives to create and the copyright monopoly helps provide such incentives.

We may therefore be willing to tolerate the ex-post costs of a monopoly because of the ex-ante benefits it provides in incentivizing and rewarding the creation of new work. But this is fundamentally a trade-off and one which gets worse as the monopoly is extended — a completely different situation from that with “real” property.

This point is made elegantly by Macaulay (opposing a copyright term extension in the 1840s):

“It is good that authors should be remunerated, and the least exceptionable way of remunerating them is by a monopoly. Yet monopoly is evil. For the sake of the good we must submit to the evil: but the evil ought not to last a day longer than is necessary for the purpose of securing the good.”

This is not something one would write about normal, ‘real’, property.

Substitutes (or, what exactly is a Monopoly)

Some people, particularly rights-holders, tend to argue that copyright isn’t a monopoly because of the existence of close substitutes (Helprin does this too where he tries to distinguish expression and ideas). In a strict sense this is simply false: a monopoly is the control over all (or most) of a market in a particular good (in this case the copies of a given cultural work). If entity X has monopoly in apples, the fact that I can buy oranges instead of apples does not change the fact that X has a monopoly.

However, in a broader sense this point is correct: the “proximity” of substitutes will clearly affect the demand curve a monopolist faces and therefore the price they can charge (in the extreme case when substitutes are perfect the ‘monopoly’ of course disappears).2

This is the point lying behind the copyright/patent distinction — the argument being that copyrighted works have much closer substitutes than patents (whether this actually true is unclear to me: what substitutes were there for Harry Potter? Many patents have relatively close competitors etc).

Nevertheless the fact remains that a copyright still acts like a monopoly in permitting the owner of a copyright to raise price above what it would have been (if not there’d be no point in having it — at least the “economic” rights portion). Furthermore, one has to be cautious in one’s logic here: the existence of close substitutes may lessen the harm of a copyright monopoly but it also reduces the benefits (the revenue incentives).

To put it most bluntly:

If copyright isn’t acting like a monopoly then, while causing little harm, it’s also not doing much good.

Specifically, if substitutes are sufficiently close that the copyright holder can only raise prices (much) to a very small degree above reproduction cost (and hence we can say no monopoly exists), then the benefits of the copyright, in terms of increased revenues to the copyright holder, must be commensurably small.

Colophon

I wrote the original version of this post over 3 years ago but failed to hit publish for reasons unknown. It’s creation was motivated by being pointed at this article by a Mr Helprin (who later fleshed out his thesis into a book). Discussions over the intervening years, especially with those advocating the extension of copyright, have only made it clearer how important it is establish the basic point that ‘copyright is a monopoly and isn’t property’.


  1. To a crude first approximation. There are many reasons why this ‘efficient’ trade may not happen (see next sentence). 

  2. As recognized in antitrust law with the endless discussions of what constitutes the ‘market’ for a given product. 

OpenHDI: Open Human Development Index

A few members of the Open Knowledge Foundation’s nascent open economics working group are having a code-sprint this Friday and Saturday to work on an app for the world bank competition currently called ‘Open HDI’ (Human Development Index):

The idea is to look at ‘development beyond GDP’ by collecting weightings on particular aspects of ‘development’ (health, education, gdp, inequality) from users and using that to build our own human development index.

We first talked about this a few months ago at the open economics online meetup. Dirk Heine and Guo Xu then put together an excellent demo version: http://eutopia.guoxu.org/ and now we’re working to take that to the status of a full app!

Is Google the next Microsoft? Competition, Welfare and Regulation in Online Search Published

My paper Is Google the next Microsoft? Competition, Welfare and Regulation in Online Search has been published in the December issue of the Review of Network Economics.

With recent antitrust and competition authority interest in Google — such as the announcement on Nov 30th of an official probe of Google by the European competition authorities1 — the paper’s publication could not come at a more appropriate time (the first version of this paper was put out in 2008 so it has also proved reasonably prescient).

Beginning from nothing fifteen years ago, today online search is a multi-billion dollar business and search engine providers such as Google have become household names.

While search has become increasingly ubiquitous it has also grown increasingly dominated by a single firm: Google. For example today in the UK Google accounts for 90% of all searches and in many other countries Google has a similar lead over its rivals.

In the paper I investigate why the search engine market is so concentrated and what implications this has for us both now, and in the future. Concluding that monopoly is currently a likely outcome I look at how competition could be promoted and a ddominant search engine regulated.

To summarize the main points:

(a) Search engines provide ordinary users with a `free’ service gaining something extremely valuable in exchange, namely ‘attention’. With attention in ever more limited supply — after all each of us have at maximum 24 hours available in each day — access to that attention is correspondingly valuable especially for those who have products or services to advertise. Thus, though web search engines do not charge users, they can retail the attention generated by their service to those are willing to pay for access to it.

(b) The search engine market is already extremely concentrated. In many countries a single firm (usually Google) possesses of market share an order of magnitude larger than its rivals. As stated, in the UK Google already holds over 90% market share as. However, it is also noteworthy that there are some marked variations, for example in China Google trails the leaders.

(c) Competition issues are likely to become more serious as this dominance becomes established. It is important to realise that while search appears ‘free’ we do pay indirectly via the charges to advertises — who must in turn recoup that money from consumers. A dominant search engine may have incentives to distort its ‘results’ in ways that increase it owns profits but harm society — for example by suppressing organic search results that would substitute for or harm associated ‘sponsored’ results (adverts).

(d) There are a number of approaches that regulators and policy-makers could take to protect against these adverse consequences. For example, policy-makers could look at ways to separate the ‘software’ and ‘service’ parts of a search engines activity, or less dramatically, they could set up a regulatory body to review search result rankings and choices.

Conclusion: it will be increasingly necessary for there to be some form of oversight, possibly extending to formal regulation, of the search engine market. In several markets monopoly, or near monopoly, already exists and there is every reason to think this situation will persist. Left unchecked by competition the private interests of a search engine and the interests of society as whole will diverge and, thus, left entirely unregulated, the online search market will develop in ways that are harmful to the general welfare.


  1. Financial Times, Brussels launches formal Google probe (Nov 30 2010), Update: Google’s clout raises concerns in France, International Herald Tribue, Dec 15 2010, p.21 

Progress in the last 3 months

As part of my Shuttleworth Fellowship I’m preparing quarterly reports on what I’ve been up to. So, herewith are some some highlights from the last 3 months.

Talks and Events

Open Data Projects

General

Papers on the Size and Value of EU Public Domain

I’ve just posted two new papers on the size of and ‘value’ the EU Public Domain. These papers are based on the research done as part of the Public Domain in Europe (EUPD) Research Project (which has now been submitted).

  • Summary Slides Covering Size and Value of the Public Domain – Talk at COMMUNIA in Feb 2010
  • The Size of the EU Public Domain

    This paper reports results from a large recent study of the public domain in the European Union. Based on a combination of catalogue and survey data our figures for the number of items (and works) in the public domain extend across a variety of media and provide one of the first quantitative estimates of the ‘size’ of the public domain in any jurisdiction. We find that for books and recordings the public domain is around 10-20% of published extant output and would consist of millions and hundreds of thousands of items respectively. For films the figure is dramatically lower (almost zero). We also establish some interesting figures relevant to the orphan works debate such as the number of catalogue entries without any identified author (approximately 10%).

  • The Value of the EU Public Domain

    This paper reports results from a large recent study of the public domain in the European Union. Based on a combination of catalogue, commercial and survey data we present detailed figures both on the prices (and price differences) of in copyright and public domain material and on the usage of that material. Combined with the estimates for the size of the EU public domain presented in the companion paper our results allow us to provide the first quantitative estimate for the `value’ of the public domain (i.e. welfare gains from its existence) in any jurisdiction. We also find clear, and statistically significant, differences between the prices of in-copyright and public-domain in the two areas which we have significant data: books and sounds recordings in the UK. Patterns of usage indicate a significant demand for public domain material but limitations of the data make it difficult to draw conclusions on the impact of entry into the public domain on demand.

The results on price differences are particularly striking, as to my knowledge, these are by far the largest analysis done to date. More significantly, they clearly show that the claim in the Commission’s impact assessment that there was no price effect of copyright (compared to the public domain) was wrong. That claim was central to the impact assessment and to the proposal to extend copyright term in sound recordings (a claim that was based on a single study using a very small size, performed by PwC as part of a music-industry sponsored piece of consultancy for submission to the Gowers review).

Proposal in Brazil to Legalize Non-Commercial File-Sharing and Monetize P2P

Pedro Paranaguá points me to a proposal for monetizing P2P file-sharing in Brazil.

The proposal has been submitted as part of Brazil’s open public consultation to review its copyright law. As he summarizes it for non-Portugese speakers like myself (though Google translate did not do a bad job!):

Basically, non-commercial file sharing will be authorized – should the proposal be accepted and passed into law. Each broadband user will pay a R$3 (or US$1.71) fee together with her/his monthly Internet Service Provider (ISP) bill. The ISP will collect the fees and distribute it to a collecting society comprised of authors’ associations that will then distribute the collected fees to authors, composers, and so on in the proportion that the works are downloaded.