Sam Vaknin is the author of
Malignant Self Love - Narcissism Revisited and
After the Rain - How the West Lost the East. He served as a columnist for
Central Europe Review,
PopMatters, and
eBookWeb, a
United Press International (UPI) Senior Business Correspondent, and the editor of mental health and Central East Europe categories in
The Open Directory,
Bellaonline, and
Suite101.
Until recently, he served as the Economic Advisor to the Government of Macedonia.
Visit Sam's Web site at http://samvak.tripod.com
The Sample Articles (please scroll down to review them):
I. The Distributive Justice of the Market
II. Competing Interpellations
III. The Revolt of the Poor - The Demise of Intellectual Property
IV. Workaholism, Leisure and Pleasure
V. Notes on the Economics of Game Theory
VI. Forward to the Past - Feudalism and Communism
VII. The Dismal Mind - Economics as a Pretension to Science
Author: Sam Vaknin
Contact Info: palma.unet.com.mk; vaknin.link.com.mk
The Distributive Justice of the Market
By: Dr. Sam Vaknin
The public outcry against executive pay and compensation followed disclosures of insider trading, double dealing, and outright fraud. But even honest and productive entrepreneurs often earn more money in one year than Albert Einstein did in his entire life. This strikes many - especially academics - as unfair. Surely Einstein's contributions to human knowledge and welfare far exceed anything ever accomplished by sundry businessmen? Fortunately, this discrepancy is cause for constructive jealousy, emulation, and imitation. It can, however, lead to an orgy of destructive and self-ruinous envy.
Entrepreneurs recombine natural and human resources in novel ways. They do so to respond to forecasts of future needs, or to observations of failures and shortcomings of current products or services. Entrepreneurs are professional - though usually intuitive - futurologists. This is a valuable service and it is financed by systematic risk takers, such as venture capitalists. Surely they all deserve compensation for their efforts and the hazards they assume?
Exclusive ownership is the most ancient type of such remuneration. First movers, entrepreneurs, risk takers, owners of the wealth they generated, exploiters of resources - are allowed to exclude others from owning or exploiting the same things. Mineral concessions, patents, copyright, trademarks - are all forms of monopoly ownership. What moral right to exclude others is gained from being the first?
Nozick advanced Locke's Proviso. An exclusive ownership of property is just only if "enough and as good is left in common for others". If it does not worsen other people's lot, exclusivity is morally permissible. It can be argued, though, that all modes of exclusive ownership aggravate other people's situation. As far as everyone, bar the entrepreneur, are concerned, exclusivity also prevents a more advantageous distribution of income and wealth.
Exclusive ownership reflects real-life irreversibility. A first mover has the advantage of excess information and of irreversibly invested work, time, and effort. Economic enterprise is subject to information asymmetry: we know nothing about the future and everything about the past. This asymmetry is known as "investment risk". Society compensates the entrepreneur with one type of asymmetry - exclusive ownership - for assuming another, the investment risk.
One way of looking at it is that all others are worse off by the amount of profits and rents accruing to owner-entrepreneurs. Profits and rents reflect an intrinsic inefficiency. Another is to recall that ownership is the result of adding value to the world. It is only reasonable to expect it to yield to the entrepreneur at least this value added now and in the future.
In a "Theory of Justice" (published 1971, p. 302), John Rawls described an ideal society thus:
"(1) Each person is to have an equal right to the most extensive total system of equal basic liberties compatible with a similar system of liberty for all. (2) Social and economic inequalities are to be arranged so that they are both: (a) to the greatest benefit of the least advantaged, consistent with the just savings principle, and (b) attached to offices and positions open to all under conditions of fair equality of opportunity."
It all harks back to scarcity of resources - land, money, raw materials, manpower, creative brains. Those who can afford to do so, hoard resources to offset anxiety regarding future uncertainty. Others wallow in paucity. The distribution of means is thus skewed. "Distributive justice" deals with the just allocation of scarce resources.
Yet, even the basic terminology is somewhat fuzzy. What constitutes a resource? what is meant by allocation? Who should allocate resources - Adam Smith's "invisible hand", the government, the consumer, or business? Should it reflect differences in power, in intelligence, in knowledge, or in heredity? Should resource allocation be subject to a principle of entitlement? Is it reasonable to demand that it be just - or merely efficient? Are justice and efficiency antonyms?
Justice is concerned with equal access to opportunities. Equal access does not guarantee equal outcomes, invariably determined by idiosyncrasies and differences between people. Access leveraged by the application of natural or acquired capacities - translates into accrued wealth. Disparities in these capacities lead to discrepancies in accrued wealth.
The doctrine of equal access is founded on the equivalence of Men. That all men are created equal and deserve the same respect and, therefore, equal treatment is not self evident. European aristocracy well into this century would have probably found this notion abhorrent. Jose Ortega Y Gasset, writing in the 1930's, preached that access to educational and economic opportunities should be premised on one's lineage, up bringing, wealth, and social responsibilities.
A succession of societies and cultures discriminated against the ignorant, criminals, atheists, females, homosexuals, members of ethnic, religious, or racial groups, the old, the immigrant, and the poor. Communism - ostensibly a strict egalitarian idea - foundered because it failed to reconcile strict equality with economic and psychological realities within an impatient timetable.
Philosophers tried to specify a "bundle" or "package" of goods, services, and intangibles (like information, or skills, or knowledge). Justice - though not necessarily happiness - is when everyone possesses an identical bundle. Happiness - though not necessarily justice - is when each one of us possesses a "bundle" which reflects his or her preferences, priorities, and predilections. None of us will be too happy with a standardized bundle, selected by a committee of philosophers - or bureaucrats, as was the case under communism.
The market allows for the exchange of goods and services between holders of identical bundles. If I seek books, but detest oranges - I can swap them with someone in return for his books. That way both of us are rendered better off than under the strict egalitarian version.
Still, there is no guarantee that I will find my exact match - a person who is interested in swapping his books for my oranges. Illiquid, small, or imperfect markets thus inhibit the scope of these exchanges. Additionally, exchange participants have to agree on an index: how many books for how many oranges? This is the price of oranges in terms of books.
Money - the obvious "index" - does not solve this problem, merely simplifies it and facilitates exchanges. It does not eliminate the necessity to negotiate an "exchange rate". It does not prevent market failures. In other words: money is not an index. It is merely a medium of exchange and a store of value. The index - as expressed in terms of money - is the underlying agreement regarding the values of resources in terms of other resources (i.e., their relative values).
The market - and the price mechanism - increase happiness and welfare by allowing people to alter the composition of their bundles. The invisible hand is just and benevolent. But money is imperfect. The aforementioned Rawles demonstrated (1971), that we need to combine money with other measures in order to place a value on intangibles.
The prevailing market theories postulate that everyone has the same resources at some initial point (the "starting gate"). It is up to them to deploy these endowments and, thus, to ravage or increase their wealth. While the initial distribution is equal - the end distribution depends on how wisely - or imprudently - the initial distribution was used.
Egalitarian thinkers proposed to equate everyone's income in each time frame (e.g., annually). But identical incomes do not automatically yield the same accrued wealth. The latter depends on how the income is used - saved, invested, or squandered. Relative disparities of wealth are bound to emerge, regardless of the nature of income distribution.
Some say that excess wealth should be confiscated and redistributed. Progressive taxation and the welfare state aim to secure this outcome. Redistributive mechanisms reset the "wealth clock" periodically (at the end of every month, or fiscal year). In many countries, the law dictates which portion of one's income must be saved and, by implication, how much can be consumed. This conflicts with basic rights like the freedom to make economic choices.
The legalized expropriation of income (i.e., taxes) is morally dubious. Anti-tax movements have sprung all over the world and their philosophy permeates the ideology of political parties in many countries, not least the USA. Taxes are punitive: they penalize enterprise, success, entrepreneurship, foresight, and risk assumption. Welfare, on the other hand, rewards dependence and parasitism.
According to Rawles' Difference Principle, all tenets of justice are either redistributive or retributive. This ignores non-economic activities and human inherent variance. Moreover, conflict and inequality are the engines of growth and innovation - which mostly benefit the least advantaged in the long run. Experience shows that unmitigated equality results in atrophy, corruption and stagnation. Thermodynamics teaches us that life and motion are engendered by an irregular distribution of energy. Entropy - an even distribution of energy - equals death and stasis.
What about the disadvantaged and challenged - the mentally retarded, the mentally insane, the paralyzed, the chronically ill? For that matter, what about the less talented, less skilled, less daring? Dworkin (1981) proposed a compensation scheme. He suggested a model of fair distribution in which every person is given the same purchasing power and uses it to bid, in a fair auction, for resources that best fit that person's life plan, goals and preferences.
Having thus acquired these resources, we are then permitted to use them as we see fit. Obviously, we end up with disparate economic results. But we cannot complain - we were given the same purchasing power and the freedom to bid for a bundle of our choice.
Dworkin assumes that prior to the hypothetical auction, people are unaware of their own natural endowments but are willing and able to insure against being naturally disadvantaged. Their payments create an insurance pool to compensate the less fortunate for their misfortune.
This, of course, is highly unrealistic. We are usually very much aware of natural endowments and liabilities - both ours and others'. Therefore, the demand for such insurance is not universal, nor uniform. Some of us badly need and want it - others not at all. It is morally acceptable to let willing buyers and sellers to trade in such coverage (e.g., by offering charity or alms) - but may be immoral to make it compulsory.
Most of the modern welfare programs are involuntary Dworkin schemes. Worse yet, they often measure differences in natural endowments arbitrarily, compensate for lack of acquired skills, and discriminate between types of endowments in accordance with cultural biases and fads.
Libertarians limit themselves to ensuring a level playing field of just exchanges, where just actions always result in just outcomes. Justice is not dependent on a particular distribution pattern, whether as a starting point, or as an outcome. Robert Nozick "Entitlement Theory" proposed in 1974 is based on this approach.
That the market is wiser than any of its participants is a pillar of the philosophy of capitalism. In its pure form, the theory claims that markets yield patterns of merited distribution - i.e., reward and punish justly. Capitalism generate just deserts. Market failures - for instance, in the provision of public goods - should be tackled by governments. But a just distribution of income and wealth does not constitute a market failure and, therefore, should not be tampered with.
Althusser - a Critique
Competing Interpellations and the Third Text
By: Dr. Sam Vaknin
With the exception of Nietzsche, no other madman has contributed so much to human sanity as has Louis Althusser. He is mentioned twice in the Encyclopaedia Britannica as someone's teacher. There could be no greater lapse: for two important decades (the 60s and the 70s), Althusser was at the eye of all the important cultural storms. He fathered quite a few of them.
This newly-found obscurity forces me to summarize his work before suggesting a few (minor) modifications to it.
(1) Society consists of practices: economic, political and ideological.
Althusser defines a practice as:
"Any process of transformation of a determinate product, affected
by a determinate human labour, using determinate means (of production)"
The economic practice (the historically specific mode of production) transforms raw materials to finished products using human labour and other means of production, all organized within defined webs of inter-relations. The political practice does the same with social relations as the raw materials. Finally, ideology is the transformation of the way that a subject relates to his real life conditions of existence.
This is a rejection of the mechanistic worldview (replete with bases and superstructures). It is a rejection of the Marxist theorization of ideology. It is a rejection of the Hegelian fascist
"social totality". It is a dynamic, revealing, modern day model.
In it, the very existence and reproduction of the social base (not merely its expression) is dependent upon the social superstructure. The superstructure is "
relatively autonomous" and ideology has a central part in it - see entry about Marx and Engels and entry concerning Hegel.
The economic structure is determinant but another structure could be dominant, depending on the historical conjuncture. Determination (now called over-determination - see Note) specifies the form of economic production upon which the dominant practice depends. Put otherwise: the economic is determinant not because the practices of the social formation (political and ideological) are the social formation's expressive epiphenomena - but because it determines WHICH of them is dominant.
(2) People relate to the conditions of existence through the practice of ideology. Contradictions are smoothed over and (real) problems are offered false (though seemingly true ) solutions. Thus, ideology has a realistic dimension - and a dimension of representations (myths, concepts, ideas, images). There is (harsh, conflicting) reality - and the way that we represent it both to ourselves and to others.
(3) To achieve the above, ideology must not be seen to err or, worse, remain speechless. It, therefore, confronts and poses (to itself) only answerable questions. This way, it remains confined to a fabulous, legendary, contradiction-free domain. It ignores other questions altogether.
(4) Althusser introduced the concept of "The Problematic":
"The objective internal reference ... the system of questions
commanding the answers given"
It determines which problems, questions and answers are part of the game - and which should be blacklisted and never as much as mentioned. It is a structure of theory (ideology), a framework and the repertoire of discourses which - ultimately - yield a text or a practice. All the rest is excluded.
It, therefore, becomes clear that what is omitted is of no less importance than what is included in a text. The problematic of a text relates to its historical context ("moment") by incorporating both: inclusions as well as omissions, presences as much as absences. The problematic of the text fosters the generation of answers to posed questions - and of defective answers to excluded questions.
(5) The task of
"scientific" (e.g., Marxist) discourse, of Althusserian critical practice is to deconstruct the problematic, to read through ideology and evidence the real conditions of existence. This is a
"symptomatic reading" of TWO TEXTS:
"It divulges the undivulged event in the text that it reads and, in the
same movement, relates to it a different text, present, as a necessary
absence, in the first ... (Marx's reading of Adam Smith) presupposes
the existence of two texts and the measurement of the first against
the second. But what distinguishes this new reading from the old,
is the fact that in the new one, the second text is articulated with the
lapses in the first text ... (Marx measures) the problematic contained
in the paradox of an answer which does not correspond to any questions posed."
Althusser is contrasting the manifest text with a latent text which is the result of the lapses, distortions, silences and absences in the manifest text. The latent text is the "diary of the struggle" of the unposed question to be posed and answered.
(6) Ideology is a practice with lived and material dimensions. It has costumes, rituals, behaviour patterns, ways of thinking. The State employs Ideological Apparatuses (ISAs) to reproduce ideology through practices and productions: (organized) religion, the education system, the family, (organized) politics, the media, the industries of culture.
"All ideology has the function (which defines it) of 'constructing'
concrete individuals as subjects"
Subjects to what? The answer: to the material practices of the ideology. This (the creation of subjects) is done by the acts of "hailing" or "interpellation". These are acts of attracting attention (hailing) , forcing the individuals to generate meaning (interpretation) and making them participate in the practice.
These theoretical tools were widely used to analyze the Advertising and the film industries.
The ideology of consumption (which is, undeniably, the most material of all practices) uses advertising to transform individuals to subjects (=to consumers). It uses advertising to interpellate them. The advertisements attract attention, force people to introduce meaning to them and, as a result, to consume. The most famous example is the use of "People like you (buy this or do that)" in ads. The reader / viewer is interpellated both as an individual ("you") and as a member of a group ("people like..."). He occupies the empty (imaginary) space of the "you" in the ad. This is ideological "misrecognition". First, many others misrecognize themselves as that "you" (an impossibility in the real world). Secondly, the misrecognized "you" exists only in the ad because it was created by it, it has no real world correlate.
The reader or viewer of the ad is transformed into the subject of (and subject to) the material practice of the ideology (consumption, in this case).
Althusser was a Marxist. The dominant mode of production in his days (and even more so today) was capitalism. His implied criticism of the material dimensions of ideological practices should be taken with more than a grain of salt. Interpellated by the ideology of Marxism himself, he generalized on his personal experience and described ideologies as infallible, omnipotent, ever successful. Ideologies, to him, were impeccably functioning machines which can always be relied upon to reproduce subjects with all the habits and thought patterns required by the dominant mode of production.
And this is where Althusser fails, trapped by dogmatism and more than a touch of paranoia. He neglects to treat two all-important questions (his problematic may have not allowed it):
(a) What do ideologies look for ? Why do they engage in their practice? What is the ultimate goal?
(b) What happens in a pluralistic environment rich in competing ideologies?
Althusser stipulates the existence of two texts, manifest and hidden. The latter co-exists with the former, very much as a black figure defines its white background. The background is also a figure and it is only arbitrarily - the result of historical conditioning - that we bestow a preferred status upon the one. The latent text can be extracted from the manifest one by listening to the absences, the lapses and the silences in the manifest text.
But: what dictates the laws of extraction ? how do we know that the latent text thus exposed is THE right one? Surely, there must exist a procedure of comparison, authentication and verification of the latent text?
A comparison of the resulting latent text to the manifest text from which it was extracted would be futile because it would be recursive. This is not even a process of iteration. It is teutological. There must exist a THIRD, "master-text", a privileged text, historically invariant, reliable, unequivocal (indifferent to interpretation-frameworks), universally accessible, atemporal and non-spatial. This third text is COMPLETE in the sense that it includes both the manifest and the latent. Actually, it should include all the possible texts (a LIBRARY function). The historical moment will determine which of them will be manifest and which latent, according to the needs of the mode of production and the various practices. Not all these texts will be conscious and accessible to the individual but such a text would embody and dictate the rules of comparison between the manifest text and ITSELF (the Third Text) , being the COMPLETE text.
Only through a comparison between a partial text and a complete text can the deficiencies of the partial text be exposed. A comparison between partial texts will yield no certain results and a comparison between the text and itself (as Althusser suggests) is absolutely meaningless.
This Third Text is the human psyche. We constantly compare texts that we read to this Third Text, a copy of which we all carry with us. We are unaware of most of the texts incorporated in this master text of ours. When faced with a manifest text which is new to us, we first "download" the "rules of comparison (engagement)". We sift through the manifest text. We compare it to our COMPLETE master text and see which parts are missing. These constitute the latent text. The manifest text serves as a trigger which brings to our consciousness appropriate and relevant portions of the Third Text. It also generates the latent text in us.
If this sounds familiar it is because this pattern of confronting (the manifest text), comparing (with our master text) and storing the results (the latent text and the manifest text are brought to consciousness) - is used by mother nature itself. The DNA is such a "Master Text, Third Text". It includes all the genetic-biological texts some manifest, some latent. Only stimuli in its environment (=a manifest text) can provoke it to generate its own (hitherto latent) "text". The same would apply to computer applications.
The Third Text, therefore, has an invariant nature (it includes all possible texts) - and, yet, is changeable by interacting with manifest texts. This contradiction is only apparent. The Third Text does not change - only different parts of it are brought to our awareness as a result of the interaction with the manifest text. We can also safely say that one does not need to be an Althusserian critic or engage in "scientific" discourse to deconstruct the problematic. Every reader of text immediately and always deconstructs it. The very act of reading involves comparison with the Third Text which inevitably leads to the generation of a latent text.
And this precisely is why some interpellations fail. The subject deconstructs every message even if he is not trained in critical practice. He is interpellated or fails to be interpellated depending on what latent message was generated through the comparison with the Third Text. And because the Third Text includes ALL possible texts, the subject is given to numerous competing interpellations offered by many ideologies, mostly at odds with each other. The subject is in an environment of COMPETING INTERPELLATIONS (especially in this day and age of information glut). The failure of one interpellation - normally means the success of another (whose interpellation is based on the latent text generated in the comparison process or on a manifest text of its own, or on a latent text generated by another text).
There are competing ideologies even in the most severe of authoritarian regimes. Sometimes, IASs within the same social formation offer competing ideologies : the political Party, the Church, the Family, the Army, the Media, the Civilian Regime, the Bureaucracy. To assume that interpellations are offered to the potential subjects successively (and not in parallel) defies experience (though it does simplify the thought-system).
Clarifying the HOW, though, does not shed light on the WHY.
Advertising leads to the interpellation of the subject to effect the material practice of consumption. Put more simply: there is money involved. Other ideologies - propagated through organized religions, for instance - lead to prayer. Could this be the material practice that they are looking for? No way. Money, prayer, the very ability to interpellate - they are all representations of power over other human beings. The business concern, the church, the political party, the family, the media, the culture industries - are all looking for the same thing: influence, power, might. Absurdly, interpellation is used to secure one paramount thing: the ability to interpellate. Behind every material practice stands a psychological practice (very much as the Third Text - the psyche - stands behind every text, latent or manifest).
The media could be different: money, spiritual prowess, physical brutality, subtle messages. But everyone (even individuals in their private life) is looking to hail and interpellate others and thus manipulate them to succumb to their material practices. A short sighted view would say that the businessman interpellates in order to make money. But the important question is: what ever for? What drives ideologies to establish material practices and to interpellate people to participate in them and become subjects? The will to power. the wish to be able to interpellate. It is this cyclical nature of Althusser's teachings (ideologies interpellate in order to be able to interpellate) and his dogmatic approach (ideologies never fail) which doomed his otherwise brilliant observations to oblivion.
Note
In Althusser's writings the Marxist determination remains as Over-determination. This is a structured articulation of a number of contradictions and determinations (between the practices). This is very reminiscent of Freud's Dream Theory and of the concept of Superposition in Quantum Mechanics.
The Revolt of the Poor - The Demise of Intellectual Property
By: Dr. Sam Vaknin
Three years ago I published a book of short stories in Israel. The publishing house belongs to Israel's leading (and exceedingly wealthy) newspaper. I signed a contract which stated that I am entitled to receive 8% of the income from the sales of the book after commissions payable to distributors, shops, etc. A few months later (1997), I won the coveted Prize of the Ministry of Education (for short prose). The prize money (a few thousand DMs) was snatched by the publishing house on the legal grounds that all the money generated by the book belongs to them because they own the copyright.
In the mythology generated by capitalism to pacify the masses, the myth of intellectual property stands out. It goes like this : if the rights to intellectual property were not defined and enforced, commercial entrepreneurs would not have taken on the risks associated with publishing books, recording records, and preparing multimedia products. As a result, creative people will have suffered because they will have found no way to make their works accessible to the public. Ultimately, it is the public which pays the price of piracy, goes the refrain.
But this is factually untrue . In the USA there is a very limited group of authors who actually live by their pen. Only select musicians eke out a living from their noisy vocation (most of them rock stars who own their labels - George Michael had to fight Sony to do just that) and very few actors come close to deriving subsistence level income from their profession. All these can no longer be thought of as mostly creative people. Forced to defend their intellectual property rights and the interests of Big Money, Madonna, Michael Jackson, Schwarzenegger and Grisham are businessmen at least as much as they are artists.
Economically and rationally, we should expect that the costlier a work of art is to produce and the narrower its market - the more emphasized its intellectual property rights.
Consider a publishing house.
A book which costs 50,000 DM to produce with a potential audience of 1000 purchasers (certain academic texts are like this) - would have to be priced at a a minimum of 100 DM to recoup only the direct costs. If illegally copied (thereby shrinking the potential market as some people will prefer to buy the cheaper illegal copies) - its price would have to go up prohibitively to recoup costs, thus driving out potential buyers. The story is different if a book costs 10,000 DM to produce and is priced at 20 DM a copy with a potential readership of 1,000,000 readers. Piracy (illegal copying) should in this case be more readily tolerated as a marginal phenomenon.
This is the theory. But the facts are tellingly different. The less the cost of production (brought down by digital technologies) - the fiercer the battle against piracy. The bigger the market - the more pressure is applied to clamp down on samizdat entrepreneurs.
Governments, from China to Macedonia, are introducing intellectual property laws (under pressure from rich world countries) and enforcing them belatedly. But where one factory is closed on shore (as has been the case in mainland China) - two sprout off shore (as is the case in Hong Kong and in Bulgaria).
But this defies logic : the market today is global, the costs of production are lower (with the exception of the music and film industries), the marketing channels more numerous (half of the income of movie studios emanates from video cassette sales), the speedy recouping of the investment virtually guaranteed. Moreover, piracy thrives in very poor markets in which the population would anyhow not have paid the legal price. The illegal product is inferior to the legal copy (it comes with no literature, warranties or support). So why should the big manufacturers, publishing houses, record companies, software companies and fashion houses worry?
The answer lurks in history. Intellectual property is a relatively new notion. In the near past, no one considered knowledge or the fruits of creativity (art, design) as 'patentable', or as someone's 'property'. The artist was but a mere channel through which divine grace flowed. Texts, discoveries, inventions, works of art and music, designs - all belonged to the community and could be replicated freely. True, the chosen ones, the conduits, were honoured but were rarely financially rewarded. They were commissioned to produce their works of art and were salaried, in most cases. Only with the advent of the Industrial Revolution were the embryonic precursors of intellectual property introduced but they were still limited to industrial designs and processes, mainly as embedded in machinery. The patent was born. The more massive the market, the more sophisticated the sales and marketing techniques, the bigger the financial stakes - the larger loomed the issue of intellectual property. It spread from machinery to designs, processes, books, newspapers, any printed matter, works of art and music, films (which, at their beginning were not considered art), software, software embedded in hardware, processes, business methods, and even unto genetic material.
Intellectual property rights - despite their noble title - are less about the intellect and more about property. This is Big Money : the markets in intellectual property outweigh the total industrial production in the world. The aim is to secure a monopoly on a specific work. This is an especially grave matter in academic publishing where small- circulation magazines do not allow their content to be quoted or published even for non-commercial purposes. The monopolists of knowledge and intellectual products cannot allow competition anywhere in the world - because theirs is a world market. A pirate in Skopje is in direct competition with Bill Gates. When he sells a pirated Microsoft product - he is depriving Microsoft not only of its income, but of a client (=future income), of its monopolistic status (cheap copies can be smuggled into other markets), and of its competition-deterring image (a major monopoly preserving asset). This is a threat which Microsoft cannot tolerate. Hence its efforts to eradicate piracy - successful in China and an utter failure in legally-relaxed Russia.
But what Microsoft fails to understand is that the problem lies with its pricing policy - not with the pirates. When faced with a global marketplace, a company can adopt one of two policies: either to adjust the price of its products to a world average of purchasing power - or to use discretionary differential pricing (as pharmaceutical companies were forced to do in Brazil and South Africa). A Macedonian with an average monthly income of 160 USD clearly cannot afford to buy the Encyclopaedia Encarta Deluxe. In America, 50 USD is the income generated in 4 hours of an average job. In Macedonian terms, therefore, the Encarta is 20 times more expensive. Either the price should be lowered in the Macedonian market - or an average world price should be fixed which will reflect an average global purchasing power.
Something must be done about it not only from the economic point of view. Intellectual products are very price sensitive and highly elastic. Lower prices will be more than compensated for by a much higher sales volume. There is no other way to explain the pirate industries : evidently, at the right price a lot of people are willing to buy these products. High prices are an implicit trade-off favouring small, elite, select, rich world clientele. This raises a moral issue : are the children of Macedonia less worthy of education and access to the latest in human knowledge and creation ?
Two developments threaten the future of intellectual property rights. One is the Internet. Academics, fed up with the monopolistic practices of professional publications - already publish on the web in big numbers. I published a few book on the Internet and they can be freely downloaded by anyone who has a computer or a modem. The full text of electronic magazines, trade journals, billboards, professional publications, and thousands of books is available online. Hackers even made sites available from which it is possible to download whole software and multimedia products. It is very easy and cheap to publish on the Internet, the barriers to entry are virtually nil. Web pages are hosted free of charge, and authoring and publishing software tools are incorporated in most word processors and browser applications. As the Internet acquires more impressive sound and video capabilities it will proceed to threaten the monopoly of the record companies, the movie studios and so on.
The second development is also technological. The oft-vindicated Moore's law predicts the doubling of computer memory capacity every 18 months. But memory is only one aspect of computing power. Another is the rapid simultaneous advance on all technological fronts. Miniaturization and concurrent empowerment by software tools have made it possible for individuals to emulate much larger scale organizations successfully. A single person, sitting at home with 5000 USD worth of equipment can fully compete with the best products of the best printing houses anywhere. CD-ROMs can be written on, stamped and copied in house. A complete music studio with the latest in digital technology has been condensed to the dimensions of a single chip. This will lead to personal publishing, personal music recording, and the to the digitization of plastic art. But this is only one side of the story.
The relative advantage of the intellectual property corporation does not consist exclusively in its technological prowess. Rather it lies in its vast pool of capital, its marketing clout, market positioning, sales organization, and distribution network.
Nowadays, anyone can print a visually impressive book, using the above-mentioned cheap equipment. But in an age of information glut, it is the marketing, the media campaign, the distribution, and the sales that determine the economic outcome.
This advantage, however, is also being eroded.
First, there is a psychological shift, a reaction to the commercialization of intellect and spirit. Creative people are repelled by what they regard as an oligarchic establishment of institutionalized, lowest common denominator art and they are fighting back.
Secondly, the Internet is a huge (200 million people), truly cosmopolitan market, with its own marketing channels freely available to all. Even by default, with a minimum investment, the likelihood of being seen by surprisingly large numbers of consumers is high.
I published
one book the traditional way - and
another on the Internet. In 50 months, I have received 6500 written responses regarding
my electronic book. Well over 500,000 people read it (my Link Exchange meter registered c. 2,000,000 impressions since November 1998). It is a
textbook (in psychopathology) - and 500,000 readers is a lot for this kind of publication. I am so satisfied that I am not sure that I will ever consider a traditional publisher again. Indeed,
my last book was published in the very same way.
The demise of intellectual property has lately become abundantly clear. The old intellectual property industries are fighting tooth and nail to preserve their monopolies (patents, trademarks, copyright) and their cost advantages in manufacturing and marketing.
But they are faced with three inexorable processes which are likely to render their efforts vain:
The Newspaper Packaging
Print newspapers offer package deals of cheap content subsidized by advertising. In other words, the advertisers pay for content formation and generation and the reader has no choice but be exposed to commercial messages as he or she studies the content.
This model - adopted earlier by radio and television - rules the internet now and will rule the wireless internet in the future. Content will be made available free of all pecuniary charges. The consumer will pay by providing his personal data (demographic data, consumption patterns and preferences and so on) and by being exposed to advertising. Subscription based models are bound to fail.
Thus, content creators will benefit only by sharing in the advertising cake. They will find it increasingly difficult to implement the old models of royalties paid for access or of ownership of intellectual property.
Disintermediation
A lot of ink has been spilt regarding this important trend. The removal of layers of brokering and intermediation - mainly on the manufacturing and marketing levels - is a historic development (though the continuation of a long term trend).
Consider music for instance. Streaming audio on the internet or downloadable MP3 files will render the CD obsolete. The internet also provides a venue for the marketing of niche products and reduces the barriers to entry previously imposed by the need to engage in costly marketing ("branding") campaigns and manufacturing activities.
This trend is also likely to restore the balance between artist and the commercial exploiters of his product. The very definition of "artist" will expand to include all creative people. One will seek to distinguish oneself, to "brand" oneself and to auction off one's services, ideas, products, designs, experience, etc. This is a return to pre-industrial times when artisans ruled the economic scene. Work stability will vanish and work mobility will increase in a landscape of shifting allegiances, head hunting, remote collaboration and similar labour market trends.
Market Fragmentation
In a fragmented market with a myriad of mutually exclusive market niches, consumer preferences and marketing and sales channels - economies of scale in manufacturing and distribution are meaningless. Narrowcasting replaces broadcasting, mass customization replaces mass production, a network of shifting affiliations replaces the rigid owned-branch system. The decentralized, intrapreneurship-based corporation is a late response to these trends. The mega-corporation of the future is more likely to act as a collective of start-ups than as a homogeneous, uniform (and, to conspiracy theorists, sinister) juggernaut it once was.
(continued)
