DRM technology and policy

[John S. Denker]

I wrote:
 >>
>> And then they claim to have "proved" thereby 
>> that all DRM is futile.
>> This is the height of illogic.


On 04/22/2003 10:30 PM, Ian Grigg wrote:
> 
> The basic argument goes thusly:  software product
> can be copied for zero marginal cost (and some high
> initial cracking cost).  

OK.

 > Thus, the marginal cost of
> the product should shrink as it is limited by the
> cost of distribution and the cost of cracking
> competing product.

No, the marginal cost of the product started out
zero and remains zero.  It does not shrink.
The presence or absence of competing product
does not change this.

 > Both of these are also zero.
> So any free market would result in the costs of
> software product shrinking to zero.

This is getting sloppy.  It blurs "cost" with
"marginal cost".

The total cost includes fixed costs.  It
does not shrink to zero.  The cost per unit
shrinks toward zero, but does not shrink "to"
zero unless the market is infinite.  I've
sold into some small markets and some fairly
large markets, but I've never sold into an
infinite market.

Fixing the price at a point appropriate for
the infinite market is absurd in a finite
market.  It results in not recovering costs.
This violates one of the most elementary
notions of economics.

There also seems to be here the assumption
that all units must sell for a price equal
to the marginal cost.  Economics does not
require this.  One can show that the marginal
unit should sell for the marginal price=cost,
but the proof does not generalize to any
other unit.

> It's an economic proof, or theory, if you like.  The
> real import is that it is practical and borne out
> by experience:  There is no longer a plausible
> physical foundation for the sysem of intellectual
> property that is now in place to protect performances.

It's not directly a physical foundation.
Copyright is a legal fiction, and always
has been.  It eventually becomes physical
if you violate it, because guys with guns
will physically haul you into court.


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