DeCSS, crypto, law, and economics

[Pete Chown]

Eric Rescorla wrote:

> No, this isn't true. Say that Americans are willing to pay 50% more
> for DVDs than Europeans. It would make sense for producers to attempt
> to segment the market.

You are right that producers would want to segment the market, but we 
have no reason to introduce extra laws to help them.  We would only have 
a reason to do that when segmenting the market results in greater 
efficiency, not merely greater profits.

With DVDs we have a complex situation.  Supposedly studios can make more 
per film, so they can afford to make more marginal films.  Also more 
people are offered films at a price they can afford.  Oddly, in practice 
it doesn't seem to work this way.  Films tend to be launched in the US, 
which is one of the lowest cost markets.  Films that do badly could 
theoretically be released at a higher cost in other markets, to recoup 
the expenditure through differential pricing.  In practice they seem to 
be dropped.

Coupled with this, we have the negative effect on the technology 
industry that results from DRM.  A small efficiency gain for the content 
industry could become a large efficiency loss for the technology 
industry.  Suppose that open source operating systems were technically 
able to play DVDs but were prohibited from doing so by law.  Suppose 
also that open source was a much more efficient economic model.  You 
would now have a more classic case of market distortion, which also 
gives rise to inefficiency.

One last point is that governments serve the interests primarily of 
their own people.  So the job of Britain's government is to get me, and 
other Brits, the best possible deal on films within the UK.  This might 
mean balancing the interests of British consumers against British film 
producers.  It doesn't mean balancing British consumers against foreign 
film producers.  If no films were made in Britain, the government would 
logically insist on a completely free market that allowed parallel 
imports and circumvention measures.

> I don't speak for Mr. Denker, but the point I think is relevant here
> is that there are a fair number of situations in which removal of
> some freedom would result in a superior situation for everyone
> (Pareto-dominant). I'm not convinced that maximising freedom
> is the best approach in all such cases.

I agree; for example copyright itself is a restriction on commercial 
freedom in a sense.  You have to weigh up the pros and cons in each 
case.  For me the collateral damage from DRM and region locking is 
simply too great, and so I believe it should be prohibited (or that 
people should be allowed to circumvent it, which would have the same 
effect).

-- 
Pete


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