I hope the following is a reasonably good summary of the intellectual property dilemma and what forseeable courses of action there are. I wrote it a few months ago and decided to post it after talking to some people about the recent JSTOR case.

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Today, vast numbers of people obtain music, movies, software, and other forms of copyrighted content in ways that don’t result in any income for the content creator, namely through online piracy or bootleg physical copies. We can expect that such piracy will continue to become more common as it becomes easier and more accepted. This trend poses a serious threat to society’s cultural health. If almost everyone pirates, eventually the price will become so high that the people who do pay will stop. If no one pays, then there is no incentive to create. It’s true that creativity is often its own reward, but certainly a large portion of the current output of content wouldn’t exist if not for the profit motive, things like major motion pictures.

For a useful discussion of this issue, it is necessary to realize that the term “intellectual property” is a misnomer. For the vast majority of human history, people would have laughed at you if you shared an idea, story, or song and then asserted the right to control its future dissemination and use. It was understood that if you wanted to keep something for yourself, you should keep it to yourself. Property is the possession of scarce physical objects that can only be obtained by stealing them from their owner. It doesn’t make sense to apply the property metaphor to digital content, which can be copied infinitely without the original owner becoming any poorer. For more about why intellectual property is bad terminology designed to confuse you, see this essay by Richard Stallman, one of the founders of the free software movement.

Intellectual property rights are thus not natural rights, but rights granted by the state in order to incentivize creativity and innovation. If people can have a temporary monopoly on an idea, so the theory goes, then they will be more likely to create things that benefit everyone, but would otherwise not be worth creating because of the risk of someone else copying their idea or creation and taking away potential profit. There is actually no empirical evidence that state protection of intellectual property rights has historically or presently resulted in a higher level of creativity and innovation than what would have existed in their absence, and some reason to suspect that the opposite is in fact true.

With the invention of the printing press, and then the phonograph, and then motion picture film, people were able to make money from content, but what they were really doing was charging for the physical medium. With this state of affairs, intellectual property worked okay for a long time, until new facts got in the way. The advent of the Internet, which makes the cost of reproducing content almost zero, upended that business model, and the content industries are still struggling to adjust. The Internet also reduces the barrier to entry for content creators and makes it easier for creators and consumers to find each other, both of which obsolete the traditional industries whose value propositions mainly consist of (a) helping finance new works, because they are expensive and time-consuming (economically risky) to create and (b) helping expose those works to a large market.

There are several possible solutions:

• Institute pervasive Internet monitoring and punishment for pirates.  This won’t do, because police states are bad, and it’s also politically unlikely and technically infeasible due to widespread strong encryption.
• The status quo.  It actually seems to work alright.  A lot of people will pay, a lot of people will pirate, live experiences like concerts and movie theaters will continue to offer added value, and the RIAA and MPAA will continue to attempt to implement the business model of suing torrenters and offering modest settlements as an alternative.
• The content industries could adjust prices to reflect the market.  Most people would like to support their favorite artists if they could afford it.  Setting prices high enough to turn a profit but low enough to make piracy unattractive could actually increase sales. former record label executive suggested that £1 albums would be optimal.
• The government (or some corporation) could set up a distribution channel for all content.  Let everyone download as much content as they want.  Artists are paid based on the popularity of their work.  This could be funded by any of several taxation schemes based on whether cultural products should be available free to all or paid for in proportion to their use.

Investors have exchanges for lots of things, like stocks, currencies and commodities.  They place buy and sell orders indicating what they want to exchange and at what price, and the exchange automatically executes a transaction whenever compatible buy and sell orders are outstanding. (I’m not an investing geek, so forgive me if this is somehow wrong.)

Why don’t we have a general exchange for every kind of good that can be bought and sold?  Why should I have to search Google, Amazon, some price comparison site or Craigslist when I want something, often coming up empty-handed, when I could just place a buy order for it on a global exchange, and have the exchange find the optimal seller, if one exists, based on price, proximity, reputation, etc., transfer them my money, and tell them to mail me my item?

One might object that everyday goods aren’t like financial instruments. There’s an infinite number of kinds of goods, and the instances of one kind of good are going to differ from each other slightly or significantly in various ways that are of concern to the buyer.  This is all true, but I don’t think it’s a barrier to automated trading.  You’d just need an agreed-upon taxonomy of goods and an ontology for describing them.  Then, buyers can state the type and minimum attributes of what they want and sellers can state the type and attributes of what they have.  The exchange executes a transaction, optionally taking into consideration factors like how good the seller’s reputation is and how long it will take to ship.

Voila, Semantic Market.