Economists' Topsy-Turvy View of Piracy

Intellectual Property and Copyright and Trademark

Article Snapshot


Stan Liebowitz


Review of Economic Research on Copyright Issues, Vol. 2, No. 1, pp. 5-17, 2005


This paper considers how much copyright piracy can help producers of created works.

Policy Relevance

The positive effect of unauthorized copying on product sales is likely to be very small. Overall, piracy is still harmful. Claims that it is beneficial should be tested empirically.

Main Points

  • The author’s own study of photocopying showed that unauthorized copying can lead to increased sales of books (“indirect appropriability”). But most economists today take the idea too far. In reality the effect is very limited.

  • Stealing physical objects might sometimes increase sales, but no one suggests this means that we would all be better off if theft were legal. Producers are likely to know if free samples would help sales; when benefits are likely, they need not be forced to offer them.

  • Copyright owners benefit from unauthorized copying only when they can capture the value realized from the copying, either by limiting copying or by charge more for the originals. This is not true in the case of p2p file sharing of music and in many other examples of copying today.

  • The overall impact of unauthorized copying also partly depends on whether a larger audience increases the value of a work (“network effects”) and whether exposure increases sales (“exposure effect”). But these effects can cut either way.  

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