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Moral Pricing

Most people will do what is right if it's reasonable, even if they aren't forced.

By Petrarch  |  August 14, 2007

Along with opportunities, the Internet has created its share of bogeymen.  One of the better-known objects of popular hatred is the Recording Industry Association of America (RIAA), closely followed by the Motion Picture Association of America (MPAA).  These two organizations represent the corporations that produce and distribute popular entertainment via recorded media - that is, CDs and movies.

Copying music and movies has been possible for at least a quarter-century, since cassette tape decks and VCRs became popular in the 1970s and 1980s.  However, the analog technology of those systems meant that every time you made a recording, the quality got worse.  By the time you tried to make a copy of a friend of a friend of a friend's tape, there was nothing left but static - even if you found a friend with the tape you wanted to copy.  This puts a natural damper on the fun - it becomes easier just to go to the music store and darn well shell out $5 for the tape.

Modern digital computers, combined with the Internet, have eliminated these issues.  No matter how obscure your taste in music, there is surely at least one person out there who shares it, and who has posted the song you seek.  And, digital recording allows copies to be absolutely identical to the original - they don't degrade in quality at all.  So, a copy of a copy of a copy of a copy, is just as good as the original master was.

As one might expect, actual purchases of music began to decline, while file-sharing activity skyrocketed.  In the last few years, RIAA and MPAA have made themselves notorious for suing anyone and everyone who might have ever copied or shared a song, from elementary school children to retirees, even pets.  File-sharing networks improved accordingly, adding encryption layers, anonymity functions, and peer-to-peer capabilities, to provide privacy and functional immunity to legal attacks.

But a funny thing happened on the way to a world of entertainers in rags.  Apple's iTunes, and other online systems, have shown that people are, indeed, willing to pay real money for music - even when they don't receive anything physical in return, such as a CD.  Despite the fact that most any music can be found online for nothing, and the relatively unsuccessful (though well publicized) legal tactics of RIAA, the world is beating a path to online music vendors' doors, cash in hand.

How can this be?  The assumption of the industry has been that people will always take something for nothing if they can - that's why they have worked so hard to eliminate provisions of the law which allow limited copying and recording.  The success of legal music download sales show that assumption to be false, but why?

For a possible answer, let's look at a completely different aspect of the law: speed limits.  Most every road in the U.S. has a clearly posted speed limit.  And as anyone who drives much knows, the overwhelming majority of these limits are ignored.  If you try to drive 55 on the Washington DC Beltway, as the law requires, they will be scraping you off the guardrail with a spoon.  Again, we see what appears to be a clear case of people totally ignoring the law, and the same response is often suggested - speed cameras, more police, higher fines, to force people to comply.

Why don't they just raise the speed limit to something closer to what people actually drive - say, 70 or 75?  Of course not, comes the response, that would only make things worse - people would then drive at 90 and carnage would ensue.  The belief here is that people will do purely what they can get away with - as with copying music, so with speed limits.

Our tax dollars, however, funded a fascinating study on the subject of tinkering with speed limits, with truly astonishing results.  This report made the following finding, and I quote:

The results of the study indicated that lowering posted speed limits by as much as 20 mi/h (32 km/h), or raising speed limits by as much as 15 mi/h (24 km/h) had little effect on motorist's speed. The majority of motorists did not drive 5 mi/h (8 km/h) above the posted speed limits when speed limits were raised, nor did they reduce their speed by 5 or 10 mi/h (8 or 16 km/h) when speed limits are lowered. [emphasis added]

In other words, the speed limits were irrelevant all along!  Most folks did not slow down when they were lowered, nor did they speed up when they were raised.  Sure, you get the occasional speed demon, and the occasional granny, who do what they like regardless - but you get that anyway.

Why didn't the speed limit changes have any effect?  Could it be that most people drove at a rate that they themselves set, based on their own ability, the road conditions, the prevailing traffic, and the capabilities of their car?  In other words, is it possible that people are capable of making their own judgments on what is wise, when the issue is one that they can understand?

We see this on Germany's famous Autobahns, where large stretches have no speed limit at all.  Sure, some folks do drive at 200mph - the ones who own Lamborghinis and have had special race-driver training.  Ordinary people with Opels do a more reasonable 80mph, even though there is absolutely no law preventing them from putting their foot on the floor.  They make a rational judgment - and the numbers show it's not a wrong judgment, as German autobahns are safer than US highways.  Of course there are any number of other factors at work, but it's clear that higher (or no) speed limits do not a bloodbath make.

So what do we observe?  When given the opportunity to make their own call as to the speed limit, German drivers make a fairly reasonable one most of the time.

How does this apply to music sales?  Well, we have a similar situation.  For all intents and purposes, listeners can decide what they want to pay for their music.  If they are willing to pay anything, they can go to the record store and buy a CD for $15.  If they won't pay quite that much, they can order it online for $10.  Or, they can buy music from iTunes for $1 per song.  Or, go to that Russian site that claims to be legal (hotly disputed) and buy the whole album for $2.50.  Or, go to the P2P networks and download it all for free.

And what do we find?  Sure, there are a certain number of people who download the music for free.  And, there are a certain number of people who don't mind paying $15 for a CD.  But in general, we see that most people do feel that it's appropriate to pay something for music, as long as they are not being ripped off.  That number seems to be around $1 per song.  And this is in a world where, practically speaking, there is not a lot preventing you from getting all the music you like for nothing more than the time invested to find the song you're looking for.

The reason may be found in some old-fashioned words - conscience, and judgment.  Most people realize, on some level, that musicians have to eat, and ought to be paid something.  When people see Madonna and Michael Jackson living in a way that would make a sultan's eyes pop, then they feel that they have contributed enough.  But that isn't the same thing as wanting all musicians to be playing in subway stations for pocket change.  Americans can show good judgment, and do have a conscience, and are willing to be reasonable - if the other side is being reasonable too.  There is a morality to pricing, as there is to law.

Who obeys 10MPH speed limits?  Nobody - a speed limit of 10MPH is a waste of time.  Who will pay $25 for a CD?  Fewer and fewer people, it's such a clear ripoff - in fact, hardly any record stores even dare to charge that anymore.  But pay some attention to the wisdom of the consumer, and it's possible to accomplish a large portion of the goal, without causing hate and discontent.

It's not healthy for RIAA and the MPAA to have caused their customers to hate them with such ferocity.  It's unwise for government to make public laws that are routinely ignored - and it would be even less wise for the government, or at least for the politicians, to bring on the hatred and anger that would be the result of attempting to enforce speed limits that are unreasonably low.  Whether you're dealing with the law, or with setting prices, there is an element of morals and judgment involved in the minds of the citizenry.  Flout it at your peril.