The RIAA has recently been touting that its efforts to sue consumers that illegally download and pirate their music is to benefit the artists that create the music.  Okay, I’ll humor you.  But wait…  Doesn’t this seem ironic?

The concept of scarcity should be fairly familiar to many of us - even if we don’t realize it. As noted on Wiki, “Goods and services are scarce because of the limited availability of resources … along with the limits on our technology and skillful people relative to the total amount desired.”

This should make plenty of sense to us because we are so accustomed to it. The food you buy at the store, the gas you buy at the station, or the television set you bought last week, these are all scarce goods. There is a limited amount that is available to us as a society.

The converse then is the concept of a free good. A great example of a free good is air. We are also familiar with this - something that is virtually (or literally) limitless seems a bit foolish to have to pay for.

Armed with these concepts (which are rooted in physical things) allow us to apply these concepts to the digital world. Things suddenly become tricky when we enter this arena, and it is important for you, the reader, to understand these things. The reason is simple: the market forces we are experiencing now are deeply impacted by technological factors. Having a poor understanding of these factors will result in poor business decisions, poor products, and even poor legislation (as many lawmakers are uneducated in this area, but that is another post for another time).

Consider this page that you are reading. Is this a scarce or a free good? This should be easily identified as a free good. It is limitless. You can copy the link, send it to all of your friends, and all of you can access it as often as you like whenever you like. However, to me, the owner of the site, this is not a free good. I have to pay the upfront cost to get hosting. So do you see where the complication begins? I, however, have no issue with anyone accessing my site - I paid the money to put up a site where people can read what I have to say and post any comments that they have. The computer you are reading it on, however, is a scarce good.

Many of you have probably seen the ads warning against stealing music or movies by downloading them. This is a faulty jump in logic for several reasons.

First we must understand what we mean by stealing, or theft. In the United States our legal system typically refers to theft, or stealing, as larceny. The FBI’s website notes, “The Uniform Crime Reporting (UCR) Program defines larceny-theft as the unlawful taking, carrying, leading, or riding away of property from the possession or constructive possession of another; attempts to do these acts are included in the definition. This crime category includes shoplifting, pocket-picking, purse-snatching, thefts from motor vehicles, thefts of motor vehicle parts and accessories, bicycle thefts, and so forth, in which no use of force, violence, or fraud occurs.” It isn’t difficult to see that all of our concepts of stealing and scarcity seem to be grounded in physical goods.

There is no mention of digital goods. Additionally, theft often is thought of as stealing a physical object from another party. If I steal your bicycle, I have taken it from you and you can no longer use it. But if I copy a file from your computer, you still have full access to it and as such, it should not be thought of as theft. Now, keep in mind, I am not arguing the morals of this. I think it is wrong to make unauthorized copies of files or works.

Returning to the discussion of scarce and free goods. Technically speaking, digital goods are free goods. There is a cost to initially produce them, and once they are produced, they are virtually limitless. There really is no concept of “stealing” here, and we need to be very careful of selecting our terminology to present accurate cases. With all of this understanding in mind, enter the copyright and the patent.

These two concepts serve to make free goods scarce. While I certainly understand the needs of the producing company to make money, there is a flaw in forcing an infinite good to become a scarce good. It is like trying to hold back a waterfall - eventually it will overpower all of your efforts. We see this time and time again as DRM is hacked each time an “improvement” is released (I will also discuss DRM later). Once again, I am not arguing that this is moral behavior, I am simply approaching this from an economical and technical perspective.

Therefore, the concept is to use your infinite goods to promote your scarce goods. This is a strange concept to some people, and I will go into more details later. But for now, the best example of this that you use on a daily basis is Google.

My point is this: there is a difference between physical and digital goods. We need to understand and appreciate that difference. Downloading one of your favorite songs from the internet is not the same thing as stealing the CD from a store. When you steal a CD from the store, you are robbing them of the chance to make money off of the physical item, and not the content. The content (the music) simply helps to promote the physical item (the CD). Are both wrong? If the law says so, then yes, they are both wrong to do. But I think there are better ways to use our infinite goods instead of forcing them to become scarce goods. More on that later.