Economics 101 For Newcomers To Discussion On Sharing

This is a primer on some fundamental concepts of economics: property, sale, goods, services. In the discussions around sharing of culture and knowledge, many words are thrown around that make no sense in the context of the discussion. Therefore, this is a reference article to use and link to in such discussions.

Our economy is a market economy. That means each and every person, over and above governmental welfare programs, is responsible for finding their own paycheck. This happens in one way, and one way only: a person makes a sale.

This concept, the sale, is the only thing that entitles a person to any money at all in our economy. You can sell two things: goods and services.

  • When you are selling goods, property is exchanged for value.
  • When you are selling services, something other than property is exchanged for value.

In the very common special case of an employee in our economy, a person sells 40 hours of service a week in exchange for value. Entrepreneurs, the focus of this article, can make sales of both goods and services – so for the rest of this article, we disregard the special case of employees.

(Another special case of contracts have an exchange of value is not discussed here, as they don’t concern brief and efficient interactions on a free marketplace, but significantly more complex, long-term relationships.)

This leads us to the first important observation:

Sunk costs and spent work are irrelevant to the economy. If you have spent two years creating something, that entitles you to exactly nothing. If you have spent thirty fantasillion euros perfecting your pet project, nobody cares. The only – only – thing that entitles you to money is a sale.

Nobody gets to be entitled to money because they have spent the past two years learning a skill, buying equipment, or doing something they enjoy (or don’t enjoy, for that matter). They get entitled to money when a sale happens.

This leads us to the important definition of property, in order to learn the difference between sale of goods and sale of services. In economics, property is either a tangible object or a piece of land. You could say that for something to be property, you must be able to either touch it or stand on it.

Definition of property: a "thing" (which you can touch) or land

The money-in-the-bank fallacy: At this point, defenders of monopolies and protectionism tend to mock this axiom and pick the example of how “their money in the bank” is “obviously their property”, and yet, that money in the bank account is not touchable and wholly abstract. But it would be they who argue such who are in the wrong. Money deposited in the bank is the bank’s property. You deposit coins and notes (touchable) in the bank against a contractual obligation that the bank will give coins and notes back to you on request – quite likely other coins and notes than those which were your deposited property. If you are unsure of this observation, check the economic definition again. The bank holds all four property rights.

To wit: if the bank refuses to let you withdraw money, it is legally not theft, but an unfulfilled obligation. Hence, money you deposit in the bank is the bank’s property.

With this, let’s examine a couple of common but confusing phrases, as they don’t clearly separate the fundamental concepts of economy.

I have sometimes seen “sale of digital goods”, referring to downloads. This is one example of self-contradictory wording. If no property changes hands, there is not a sale of goods at all. When you are charging to let somebody download a data stream, you are selling a service. This distinction is important. There is no such thing as “digital goods”. When charging for access to the data stream, you are charging to let somebody else manufacture their own copy of a data stream using their own property (computer, storage, network equipment). Again, no property is transferred in such a sale.

When you are selling a DVD, however, you are selling goods. Property is transferred in exchange for value. And you are selling the entire DVD, the full DVD, and nothing but the DVD. There is no such thing as “selling the DVD but not the film on it”. That concept does not exist. You are selling the physical object, every atom of it and their internal arrangements, along with every piece of information that they carry. However, other people can hold a monopoly on duplicating that information, limiting your normal property rights to your own property. We’ll return to that shortly.

The worst weaselphrase by far in deliberately confusing basic economic concepts is “Intellectual Property”, as in the concept of non-material property: this is something that goes beyond merely not existing. The phrase itself is as meaningless as “solid vacuum” or “the square root of turquoise”. The phrase is conceptually self-contradictory. Not only is there no such thing, it’s conceptually impossible for such a thing to exist. Property, by definition, is tangible. You cannot say “non-propertizable property” and expect the term to carry meaning.

That phrase is only PR semantics intended to politically legitimize what the copyright monopolies, patent monopolies, etc. are: governmentally-sanctioned private monopolies, or as lawyers say, exclusive rights, and attempting to legitimize them by deceptively masquerading them as something else entirely. These monopolies, these exclusive rights override property rights to an object.

Let’s take that again, because it is important: the copyright monopolies and patent monopolies override property rights to an object. They are limitations of property rights. This can be easily observed in the actual copyright monopoly law text of the United States, which lists six specific actions for an object that are reserved for the copyright monopoly holder, regardless of who owns the object – regardless of whose property it is. Normally, these six actions would be part of very typical property rights, but when you buy a DVD or similar goods, your rights to your own property are limited by this monopoly.

A monopoly is a privilege granted by a legal framework that gives somebody the right to prevent others from exercising normal property rights, and is a very strong market intervention. The copyright monoply and patent monopolies are two examples of such monopolies. (If I hold a monopoly on putting two planks at an angle to one another, I can call on the monopoly-issuing government to prevent you from placing your two planks – which are your property – at such an angle.)

So with the basics settled, let’s examine the sharing of culture and knowledge in proper economic terms. Let’s take a film, just to illustrate.

When somebody buys a Blu-Ray disc with a film on it, that disc becomes their property in full. However, instead of watching it, they can read the encoded information off that piece of their property onto another piece of their property, a storage unit like a hard drive. We call this process “ripping”. Then, using a third piece of their own property, they re-encode the bitpattern that makes up the movie — still all stored on the buyer’s property, and therefore intrinsically part of the buyer’s property — into a more convenient format, typically MPEG-4 encapsulated in a Matroska container. We call this process “encoding” and it all happens within the buyer’s property, exercising normal property rights.

Finally, the encoded new bitstream – the Matroska encoding of the movie, which resides on the buyer’s storage and is the buyer’s property – is shared in blueprint format, again using only the original buyer’s property (networking equipment). This time, the action is combined with other pieces of property that belong to other people, people who volunteer their property (networking equipment, storage, etc.) for the sharing to take place.

In this way, other people are able to use the shared blueprint in order to manufacture the same bitstream using their own property (storage, networking, computers), and thus, the original movie gets duplicated into more physical copies as people manufacture them.

Now, let’s compare this to the economic basics we just learned. The most obvious thing is that no sale happened anywhere in the process, so nobody is entitled to any money in a free market. It can be argued that a monopoly was violated, and it quite likely was. But that’s also what happened. A manufacturing monopoly was violated, the first action of the six monopolized actions. Somebody manufactured an object without paying governmentally-forced license fees.

We can also observe that no property has changed hands as part of the process. Everybody is using their own property to share blueprints and to manufacture from those blueprints. Therefore, by definition, nothing has been stolen and nothing has been taken.

In particular, nobody is “taking somebody’s work”. That is conceptually impossible. The only thing that entitles somebody to money is a sale. Sunk costs and sunk work are irrelevant and entitle to nothing. Further, there has been no transfer of property in this sequence of events. You cannot steal a service, you can only steal property, by definition. (As you are not taking somebody’s work, you are not taking it “without paying” or “without permission”, either.)

Note that this article doesn’t discuss whether the copyright monopoly is good, bad, righteous, or anything else. It merely establishes what it is: a monopoly, a governmentally-sanctioned private monopoly, intended to create effects that “promote progress of science and the useful arts“. Note how that link correctly speaks of “exclusive rights”, monopolies, by the way.

The next time somebody asserts a defense of the copyright monopoly where they clearly don’t understand economic fundamentals, quote this article and link them to it. Example:

> But you are taking their work without permission!

Nobody is “taking somebody’s work”. That is conceptually impossible. The only thing that entitles somebody to money is a sale. Sunk costs and sunk work are irrelevant and entitle to nothing. Further, there has been no transfer of property. You cannot steal a service, you can only steal property, by definition. (As you are not taking somebody’s work, you are not taking it “without paying” or “without permission”, either.)

See this article with Economic Concepts 101:

Hat tip to Fredrika for her relentless and correct focus on the sale.

Rick Falkvinge

Rick is the founder of the first Pirate Party and a low-altitude motorcycle pilot.

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  1. Matt`

    I’m all onboard with using proper language – nothing more irritating in this kind of discussion than someone insisting that “It’s stealing”. But, a potential argument on a moral rather than legal level occurs to me; that whilst throughout the process of sharing there is never a sale, theft or exchange of property to be seen, the recipients of that sharing are nonetheless benefitting (at a slight remove) from someone else’s sunk work, and benefitting in a way that they possibly would have preferred to be paid for.

    Personally, I’d be happy with a situation where there’s no legal obligation for anyone to act on that preference (i.e. to leave it up to individual feelings of moral obligation instead). But I’m curious as to what kind of argument you’d suggest to persuade others of that. Emphasise personal choice over government-enforced monopoly?

    1. harveyed

      Sharing someones (previous) work can create a demand for their (future) work. What is valuable is not copies but someones’ scarce resources, usually time being the most expensive nowadays.

      If you like what someone can do for you and want more of it… pay for (or invest in) their time and not the copies.

    2. harveyed

      The copies are in practice free to produce and spread. What happens when copies are spread is that either people 1) like the work 2) don’t like the work

      1. If they don’t like it they wouldn’t have payed for it in the first place.

      2. If they like it, it should have a value for them that the creator can get resources to keep creating new originals.

    3. hxa

      Benefiting from other people’s actions is very close to what morality *is*. It is something we *want*, not something we should avoid — if we all do it, we all gain.

      And what one individual would merely *prefer* others to do is not morally persuasive. The first reason to restrict someone’s actions is to prevent harm to another. That cannot apply with abstract/intellectual/informational ‘goods’ since they are only abstractly related to each other (and their creator) — they are copies. The second reason to constrain people’s actions is for wider cooperative advantage. This is the basis of the traditional economic argument for copyright/patent: such regulated markets yield more such goods. The problem here is that there is no good evidence that it is actually true.

      There are no intrinsic moral grounds for copyright, in fact the opposite: the basic moral thing to do is copy freely. And there are currently no pragmatic moral grounds for copyright/patent — hence restricting copying — either. So, in conclusion, there is nothing to build any moral case for copyright/patent on.

      The only moral obligations we have in this context are two: attribution — on the same grounds as telling the truth; and helping others produce things — on general cooperative grounds (and freely copying is a positive contribution here, not a detraction).

  2. steelneck

    The square root of turquoise is purple, not that far from the PP flag..

    Sorry, i could not resist..

    Turquoise is about 11ccee in HEX-color and that translates to 1166574 in decimal and the sq root of that is 1080 and that translates back to 438 in HEX wich is purple (actually 44 33 88 in 24-bit “true color”).

    You may delete this is you wish.

    1. Per "wertigon" Ekström

      Actually you are wrong.

      Comparing 2 numbers, it must use the same base. #438 is a convenient short-hand notation CSS uses, but the *real* color is 000438 which would be dark/blackish blue. :)

      1. steelneck

        Yes i was referring to the short hand notation that browsers use in html and css, i should have written that instead of my paranthesis.

  3. James

    I’m not quite satisfied with the argument that intangibles can’t be property because property is by definition tangible. That smacks of the dictionary fallacy, which got a lot of exercise recently from opponents of same-sex marriage.

    I mean, you’re right: “intellectual property” makes no sense. All the arguments for it are unsound, and all the analogies to physical property are absurd.

    Example: the “borrowed bicycle” analogy — borrowing a bicycle at night without someone’s permission and bringing it back in the morning. They don’t miss it, but it’s still stealing.

    Unfortunately this only works (a) if the bicycle would still be there at any time the owner happened to wake up, (b) would still be in perfect condition even if you had flattened it with a steamroller, and (c) you had actually borrowed it from someone else who’d borrowed it, and they still have it, too.

    1. liberalpiraten

      Borrowing a bicycle increases the risk of the bicycle being damaged. Especially if it is in the middle of the night and the person “borrowing” it is drunk. I know this from first hand experience 😀

    2. frank87

      In the Netherlands the court has solved this problem by allowing intangible property only if it’s acting like real property: only one person can control it ( money in the bank-account, objects in a MUD ).

      Allowing intangible property does’t really change things.

  4. Biggles

    While I sympathize with your argument – it’s not compelling if you simply define property the way you like. The rest of the world, including the major dictionaries I consulted, include intangibles as property – including the things you explicitly exclude, work-for-hire and contracts. Playing semantic games with words and their definitions isn’t an argument – is sophistry. When the OED and you define things differently – the OED wins.

    I wouldn’t care – but there are very real arguments for why Intellectual Property is different than tangible goods, and you do harm to your position with articles like the above. Having understood the logical fallacy of hand-picked definitions, intelligent readers may well disregard other things you have to say, true or not.

    1. Rick Falkvinge

      There are indeed different definitions of property, notably so from different interest groups. That’s why I was careful to note that this post is about economic terms, and the economic definition, as that’s where the discussion tends to happen. However, the large screenshot is not exactly from some obscure source – it was “define:property” typed straight into Google. (Strangely enough, I get a slightly different result when making the same query from Australia, where the “characteristic” meaning of property has replaced the “real estate” meaning.)

      (As the discussion concerns changing and defining the law, it is pointless to take your definitions from what the law says, when your intention is to change it.)

      1. Biggles

        So… you link, with the word “Property”, to the Wikipedia “Property Rights (economics)” page, where it says:

        “In economics, property usually refers to ownership (rights to the proceeds of output generated) and control over a resource or good.”

        There’s nothing there limiting that to only “a tangible object or piece of land” – your words. In fact, just the opposite – Property is not the object or land (or idea) – it’s the ownership and control of that.

        Thus the issue – you assert a definition of property that is neither common, nor matches the sources you cite. You are taking your conclusion as a given.

        I think very reasonable and honest arguments could be made that “Intellectual Property” and tangible property are fundamentally different, and should be treated differently ; but arguing that the thing you don’t like doesn’t exist isn’t going to convince anyone but people who already agree with you.

        More to the point – I’d like to see those arguments presented well. If your goal here is to make an article you and others can link to as a reference, it falls short because of the fallacious argument.

        1. Fax Machine

          Biggles, your arguments are more or less the currently predominant line of thinking. You have to to take into account the intent of changing the system. That cannot happen without bending the concepts, forging the in a new shape. You cannot get there just by following the existing common sense.

          There is obvious need to change the common sense, you also recognize that. I have to side with Rick, you have to radicalize these ideas in order to get the message through. I don’t think that “intellectual property” needs just to be redefined. I believe it has to be reinvented and renamed. Otherwise, we are suck forever with outdated concepts .

        2. frank87

          Youre misled bij the faulty definition. In the DVD-case, the resource or good is the DVD, not rights of the movie-maker.
          You don’t buy the “intellectual property” when you buy a dvd. So Rick is right: “Intellectual property” takes away ypur property-rights.

      2. Sound and Fury

        Actually, your correspondent above has a point. An economist I hold in high esteem, David D. Friedman, defines property as “a bundle of rights with respect to an object”. For instance, if I own a house, what that really means is I have the right to inhabit the house, to sue anyone who damages the house, to control who else enters the house (except that governments usually abrogate this right in favour of their own employees), etc.; and these rights can be sold or leased, either individually or as a bundle.
        Since a pattern is an object (at least if the latter term is broadly construed), a pattern can be someone’s property – someone can have the right to make copies of a pattern, to sue anyone who damages the master copy, to control who else may make copies of the pattern, etc.; and these rights, too, can be sold or leased – as the seller of a DVD of a monopoly-protected film is selling the right to render the film visual subject to certain conditions.

        In other words, “Intellectual Property” _can_ be property — but that doesn’t necessarily mean it _should_ be. The reasonableness of an item being property – more precisely, of an individual holding some given bundle of rights with respect to some given object – depends on the _efficiency_ of those rights being bundled. (Efficiency, that is, in the economic sense of Pareto or Marshall optimality.) In the case of a house, it’s obviously efficient for someone to have the right to control entry – and for that someone to be the same person who inhabits it.

        A film, whose costs of duplication are zero, is a public good, and is thus likely to be underproduced. The statist-socialist’s solution to public goods is to have the government regulate them, but government bureaux, deprived of the demand signals which price in a free market embodies, tend to produce highly inefficient outcomes. The libertarian solution is instead to find a way in which the public good can be converted to a private one. From the economic standpoint, DRM, if it a) didn’t cost money to create and b) weren’t physically incapable of working, would be an efficient solution. The other way to make a good private is, not to sell the good for money, but a contract to produce the good for a pledge of money, the obligations of both parties only coming into effect if enough buyers sign up. This is precisely the model which crowdfunding now uses, and its economic efficiency is inversely proportional to transaction costs.

        500 years ago, copyright monopolies may well have been the closest arrangement to economically efficiency in the production of patterns. Today, as relative costs have shifted, they are not. *That* is the economic argument against copyright, not an inaccurate definition of ‘property’.

        1. Rick Falkvinge

          You are building your entire objection, and justification of monopolies being property, on your “loose-sense” interpretation of “object” to include intangibles. Isn’t this particularly weak argumentation?

          If you type “define:object” in google, you will get the following definition: “a material thing that can be seen and touched”, i.e. the exact thing I argued in my article, and the very opposite from what your argumentation is based on.

          While discussing which definition from others is the most right is a bit like discussing whose Dad is the strongest, I must say I find the argumentation based on a re-definition of “object” quite weak?


        2. Sound and Fury

          (Actually a response to Rick’s response, but that doesn’t have a “respond to this” button on it…)

          As I understand the definition of property I gave above, “object” is taken in the grammatical sense; i.e. a right has a subject (its owner) and an object (that to which it applies). Thus, ‘property’ is a bundle of rights _all applying to the same object_. The intent of the definition would be the same if ‘object’ were replaced by ‘entity’. To an economist, ‘property’ denotes a bundle of rights with certain structural features. Whether the object of those rights is an “object” in the ontological sense is irrelevant.

          The structure of reality does not depend on whether we define a word to mean two things; that is an attribute of the map. What lies in the territory is that those things either are or are not homologous in some way. The only reason we care if patterns are ‘property’ is because that word has connotations – but the connotations of ‘property’ (it can be sold, taking it is theft, etc.) need not all apply to the same set of things. To draw an analogy to mathematics: the reason we care if something is a group is because we have theorems about groups, and knowing it’s a group means we don’t have to re-do the proof in the specific case. But some theorems are also true of semigroups; and a conclusion from such a theorem couldn’t be argued against by “But it doesn’t have an identity element!”. In the same way, it’s silly to argue against a claim about intellectual property by “But it’s intangible!” – you have to somehow _connect_ the intangibility to the specific connotation of ‘property’ that you wish to dispute.

          For instance, a well-founded argument of this nature might observe that the enforcement costs of production monopolies on intangibles are vastly higher than those of exclusive-use rights on tangibles, and that consequently the copyright monopoly is economically inefficient. (Note that this argument never even mentions the word “property”.)

          Playing games with the definition of words, as you attempt to do in your argument, is intellectual laziness and proves nothing.

        3. sten



          2 a person or thing to which an action or feeling is directed.

          1 an inanimate object.

        4. Sound and Fury

          I should add, in the interests of completeness and fairness, that the same error is made by those who make the inverse argument, claiming patterns to be property and copying to be theft.

          I would advise you, Rick, not to get pulled into that kind of semantic debate, firstly because definitions are irrelevant and secondly because the other side has, in the narrow semantic debate, a stronger case. Instead, you should respond to such ‘propertyist’ arguments by transferring focus from the general to the specific, and showing why the particular connotations they are trying to sneak in with the word “property” don’t apply. In that debate, your side — or rather, *our* side — holds all the cards.

    2. TG

      I hope we can agree that property should be defined in a way that is objective (we can all recognise and agree what is owned by whom) and self-consistent (conflicting claims should not arise). Clearly, tangible objects, including land and our bodies, satisfy these criteria.

      Intangibles cannot exist independently of tangibles. A novel cannot exist independently of books (or these days digital storage). A song cannot exist independently of CDs, scores and the like. Ideas and understanding cannot exist independently of neurons to embody them. Therefore, any attempt to define intangibles as property clashes with the previous acceptance of tangibles as property. Claiming ownership of a novel is to claim partial ownership of not only books, but also of paper and printing presses. These things already belong to someone, leading to conflict of ownership. Likewise there is no objective way of defining which tangible objects fall under the classification of a particular intangible. For example, I may listen to a band and feel adamant that they have “ripped off” another band, while my friend may discern no similarity at all.

      So, if you want a property system that is objective and consistent, you cannot include intangibles.

      1. Fax Machine

        You say that intagibles cannot exist without tangibles. This is less and less true. Music can exist without score, and without a CD. Book can exist without a print. Intelectual work can exist without any physical embodiment. I agree that in physical realm we can speak about property, in the world of bits and bytes, I don’t think so. Information should be open and free like water and air.

        Which does not mean that digital authors should not be able to earn money, not at all. Only that it is not my concern how they should make a living. They should figure it out themselves, just as everybody else does. They are pritty much to think of any scheme they please, as long as it does not violate my privacy and free speech (free access to information).

        1. TG

          Ok, replace book with e-reader. Replace CD with mp3. Ultimately though, digital copies still require tangible property to exist. Bits and bytes are physical states of magnetic or solid-state media, or pulses down a cable. As Rick says, a download is really the manufacturing of a copy through rearranging the existing property of the downloader’s hard-drive. We are physical beings, and we interact only with the physical world. We have no access to platonic hyperplanes of “pure information”, even if it is useful for us to conceptualise in such terms.

          On the second paragraph, I am in total agreement. :-)

        2. Fax Machine

          TG, you are right that we live in physical world. There is nothing metaphysical about a mp3 song or a jpeg photo, except if they are about a metaphysical subject :)

          Both worlds, one of atoms (material) and the the other of bits and bytes (information) are physical. But still, they are fundamentally different.

          The physical world of bits and bytes is quite new. Our culture, our laws and our politics are not yet well adapted to this new world. We are in the middle of the process of adaptation. We are using the concepts and paradigms from the world of atoms and trying to apply them to the world of bit patterns. This is the very problem we are trying to cope with. We need to reinvent property for the new, digital world. In the process, maybe we will end up also reinventing material property. But that is another story…

    3. liberalpiraten

      “The rest of the world, including the major dictionaries I consulted”

      Critical thinking exercise.

      Major dictionaries… would not happen to be covered by the copyright monopoly… or?

      Would it then be in their interest to portray words in a way that makes it easier for other people to think critically about their own source of income?

    4. hxa

      Yes, this is a problem. In the end ‘property’ can mean whatever anyone wants it to mean.

      The answer is in digging a little deeper. The real question is one of *restriction*. Why restrict access/control/etc. to certain things?

      The answer for ‘tangible’/material things is that they are finite/limited/scarce. In a sense, rules of restriction there are not really restrictions: they are *allocations* of restrictions that are already in the things themselves.

      But when we look at ‘abstract/informational/intangible goods’ we find they are *not* finite/limited — they are non-rival and can have as many users and copies as we like. In which case, where is the reason for restriction? Because these things are non-finite there is no need for allocating anything limited.

      Some people will then confuse the production with the subsequent copying — saying that there *is* scarcity in the production. But production and copying are separate. It is possible to address the finiteness of production without imposing any constraint on copying.

      So where focusing on ‘property’ leads nowhere, looking at it in terms of *restriction* clarifies the simple, obvious, indisputable difference between material and informational things.

      1. scandinavianpirate

        Yes copyright is about restriction of others freedom and not ownership of something.

        It is easy to see how outright fascist it would be to have similar restriction of freedom in various businesses other than copying of information:

        1. People can’t make their own food because restaurants lose sales.
        2. People can’t brew their own beer because think of the professional breweries.
        3. People can’t drink their tap water because think of the water bottelers.
        4. People can’t build their own furniture or buildings because think of all the lost sales for IKEA and the professional carpenters.

        In the end you could outlaw just about anything because “someone loses sales if you have your freedom”.

  5. Taart

    I do get that there’s no such thing as Intellectual Property (at least, when property is defined in the classic sense). However, the definition of property comes from a pre-digital age, and I wonder whether the definition of property should change in the light of recent inventions and possibilities. As the world increasingly becomes more digital it seems odd to me that one fundamental concept – property – seems to be left out of this world. I own my screen and keyboard, but what I manufacture by pressing keys and glancing over the results suddenly lies outside of the realm of ‘property’ (and thus ownership?).

    If so, my work (let’s say I’m a copywriter, a novelist, or a graphic designer) should almost always be considered a service (and when someone prints my logo or text, it becomes their property). I’ll not go down the road that it is stealing (elsewhere on this website a retort can be found and that will probably be used to smack me). However, it seems to be a whole new idea of doing business will be in order, certainly for online services. A novelist can publish his or her e-books, but as far as I understand the debate, there’s no ownership attached to it anymore? ‘Protection’ is not much free-markety, I know, and maybe it’s just the mental chains of the old world, but it seems to me something still is going wrong here.

  6. X

    Strictly speaking, property need not be tangible. They must, however, be *exclusionary*, that is, unable to be shared without their being diminished. Tangible things fits this definition, and copyable works do not. Also, until recent technological developments, some other things *did* fit this definition, but have since fallen out of it – e.g. frequencies in the electromagnetic spectrum.

  7. Tom Q

    This has very interesting implications for Bitcoin, because using the definitions in the article, you can eliminate the idea that Bitcoin is “not backed by anything” – a very common argument. That goes to the second standard (measurement of value) of the four uses of money (unit of value, measurement of value, standard of deferred payments, and store of value). Each Bitcoin becomes a measure of the services exchanged in the creation and/or transference of the coins, being the charge “for access to the data stream, [as] you are charging to let somebody else manufacture their own copy of a data stream”.

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  10. Lechuck

    There is a guy named castro.. Fidel castro, i would like to introduce you to him, i am pretty sure your ideas of intelectual work are quite similar, you may go well along each other.

    Luckly modern governments enjoy a far more sofisticated vision of intelectual and creative work these days, so we can have what is called: a creativy industry.

    For your understanding there are quite a few fundations and universities investing in intelectual creation. Since money is not a sin, they need to get proper money in return. What we need is more advanced laws for intelectual property, and not go back to the middle ages where this concept didnt existed, and people barely signed theier works…

    1. Marl Karx

      ./* The workers make something
      Something gets sold
      The workers get paid
      For something they made. ./*

      Pack your bags, young lad. According to the principles of Karxism, the workers should directly profit from the objects they manufacture. Or rather, the proles should control the means of production, and no middlemen should skim thereof.

      In other words, he who maketh should be he who is paid.

      I hope you are trolling. Otherwise, you speak poorly for future generations. In that land called ‘merica, you do not get adequate education. Come, my friend, to the paradise of Libertalia, where every citizen gets the education the country deserves!

      You say that “modern” government has a more “sophisticated” understanding of Imaginary Property (IP). Not true. As far as your ‘merican gov is concerned, anything and everything a person thinks is copyrighted from the moment it is “fixed”. Your snot on a tissue is protected under copyright for the term of Life + 70. The gov doesn’t care if you snotted, scribbled, or composed a great symphony.

      Step back to 1890, and you’ll notice something different. Original works, specifically maps and _books_ are protected from being copied _in the whole_ for fourteen years, renewable once. Music is protected for fourteen years as a recording, and cannot be renewed. Performances and derivative works are not protected _against_; ie, you could sneeze on that same tissue without infringing my copyright.

      Kinda gross to think about.

      We went from having nuanced understandings of works to once-size-fits-all, goddamn the future.

      1. scandinavianpirate

        “Your snot on a tissue is protected under copyright for the term of Life + 70. The gov doesn’t care if you snotted, scribbled, or composed a great symphony.”

        Actually there is a concept called “verk” in Swedish. Something is required to reach “verkshöjd” i.e. to be “of enough quality and enough original”.

        That concept moves power to the judges to be “art quality judges”.

        In Sweden judges actually decide what is enough special and original to be considered art and what is not…

      2. scandinavianpirate

        “Or rather, the proles should control the means of production, and no middlemen should skim thereof.”

        Well interesting Idea, however no one has achieved this. Every attempt has failed either at the revolution or the “proletariat dictatorship” phase. I believe it is impossible to get any further than the “proletariat dictatorship” phase because human nature. Those in power in said dictatorship just won’t give away their power voluntarily. But neither will bureaucrats in the copyright and patent monopolies…

  11. Thomas

    This was a funny text. Mr Falkvinge reminds med of an old, grumpy redneck sitting in cabin way out in the middle of nowhere, whining about the new times. Looking back to the good old days, when “real men” had “real jobs” like building a steam engine or chopping wood.
    I have a few more years under my belt than mr Falkvinge, but I am glad that I am not as old as he seems to be.
    I am a simple person and do not want to get entangled in legal details or semantics. To me, it is just reasonable that a person can own the right to his or hers work. It is fair to enjoy the fruits of ones labor. Regardless of the work has been to build a steam engine, write a text or a piece of software. I would even go so far to call this a basic human right.
    Therefore I find mr Falkvinges text to be disturbing, besides from being anti-intellectual and very backwards.

    1. scandinavianpirate

      Hi Thomas.

      You are free to try and find people to invest in your work without copyright. Why do you think you are entitled to special privileges which people in other businesses don’t have?

      1. Thomas

        Lets take one step at a time, walking before running, and leave any external investors out of this. Just to keep it simple.
        I am not asking for any special privileges, just the same rights for building a steam engine as if I am writing a text or a piece of software. I think it is reasonable that I have the right to the result of my work. Regardless if the work is manual or intellectual. To my understanding, this seems to be a strange and scary new world for mr Falkvinge.

        1. gurra

          There are no copyrights attached to building a steam engine. If you build one and sell it, then you don’t have it left so you can’t charge for it over again. You also have no right to charge for if anyone tries to build their own steam engine.

          It seems to be a scary new world to you guys, that you can’t expect to charge for copies anymore.

    2. next_ghost

      There is one major difference between owning rights to tangible and intangible results of one’s work. Current rules governing tangible property are mostly simple and straightforward and you can steer clear of breaking them just by using your common sense.

      However, applying the same rules (or even just approximately similar rules) to intangible things creates legal minefield which is impossible to navigate for everybody. From the biggest corporations in the world which have their own legal department with hundreds of lawyers specialized just on copyright to the average Joe Random User.

      FWIW, depending on your jurisdiction, you can’t even be sure if the copyright law allows you to legally visit this webpage. (In my case, Czech law allows me to view the page through statutory licence on literary and audiovisual works but even loading the embedded JavaScript code may be illegal. Computer programs are not covered by any statutory licence here.)

      This legal minefield severely hurts small and medium business. Big corporations don’t have a problem with it only because they can crush small competitors by dragging any lawsuit out for so long that the other party will run out of money and give up.

      Are you OK with such consequences of keeping your simplistic views on “fruits of ones’ labor”?

      1. Thomas

        In this new and exciting world there are several similar problems with the global usage and trade. What rights does consumers in the Czech Republic have, if the buy a goods from abroad? Regardless of the goods is tangible or intagible. Is it Czech law that covers the consumers rights or the sellers country’s law? Is it a difference in your rights if you buy it privately or from a reseller? And your rights could even differ between different resellers.
        The problem you refer to is a problem on international consumer law’s. Regardless of the sale or usage is for a tangible or intagible object.

        Have you worked with startup companies and venture capitalists? I have. In many companies. The problem you a bringing to our attention does rarely exist. On the contrary, copyright is a strenght for startups. if you have secured some kind of copyright, it increases the value of the company.
        If large coprorations want smaller companies products/ideas/business, they will simply buy them at a price agreed by both parties. Simple reason, the large corporation does not only want the “patent”, but they want to acquire the skills and the business.
        Perhaps you can find an example or two where large companies has been dragging lawsuits. But the standard procedure is that large corporations will buy small start-up companies. And this will for sure give the owners the fruit of their labour.

        Back to basic, back to the simple view. I think it is fair that we all have the right to the result of our labour! Regardless if it is manual work or intellectual. This is not the case in mr Falkvinge’s text.

        1. next_ghost

          > What rights does consumers in the Czech Republic have, if the buy a goods from abroad?

          That depends on what you mean by “abroad”. If I buy something from an e-shop anywhere within EU, the sale happens under Czech law (all such sales from one EU member state to another happen under destination state law). If I buy something from an e-shop outside the EU, the sale happens under the seller’s country law.

          > The problem you refer to is a problem on international consumer law’s. Regardless of the sale or usage is for a tangible or intagible object.

          You’re comparing apples and oranges here. Consumer protection law doesn’t create criminal liability for you as the end user (or anybody else for that matter). Copyright law does. Also, whichever website you visit, the legality of that ALWAYS depends on your local copyright law. There’s no uncertainty about which law to apply. The jurisdiction is absolutely clear but the legality of your actions themselves under that law is very often in question. And what’s worse, even lawyers can’t answer that question with reasonable certainty.

          > But the standard procedure is that large corporations will buy small start-up companies.

          That may be true in the tech sector. However, in the entertainment industry, the standard procedure is to sue the small start-up out of existence claiming copyright infringement and then launch crippled version of the exact same service again about 10 years later. It happened to Napster, and many others. YouTube would probably get sued out of existence too if it wasn’t bought by Google early on.

        2. scandinavianpirate

          “If large coprorations want smaller companies products/ideas/business, they will simply buy them at a price agreed by both parties. Simple reason, the large corporation does not only want the “patent”, but they want to acquire the skills and the business.”

          Not necessarily. They might well also be sued for infringing upon one of the larger corporations patents.

          You write “..startup companies and venture capitalists?”

          Well, maybe the problem does not exist if you have a big bag of money to start with as the case is with venture capitals. But if said capital is not available? Should it not be possible to start a new business and to compete with other actors on the market without venture capital? So much for freedom…

        3. Thomas

          @ next_ghost
          My point is that the issues with consumer rights is more about globalization than the differentiaton between tangible or intangible goods. If I buy a car in the US, it may or may not be legal to use it in Sweden, where I live. You see, the same complexity that you are pointing out.
          As for Napster and, I don’t know the details. But where they not technology companies or distributors that did not validate their sourcing? Either way, I am sure you can find a couple of examples where big corporations have acted poorly and used legal actions to fight competition. Sometimes right and sometimes wrong. But once again, these cases are outliers.

          @ scandinavian pirate
          Sure, small companies “might be sued”. But that is the exception. Small companies being bought is the normal process.

          But the discussion is just getting further away from my comment on the text. I think it is reasonable, fair and a basic human right to own the result of ones labour. To earn the fruits of you work, regardless if it is manual or intellectual. That basic right seems to be ignored by mr Falkvinge, to me that is disturbing and very backwards. Unfortunately the following discussions on international laws and “large corporations” are not really related to the original, simple topic of owning the right to your work.
          Although interesting by themselves, please keep to the topic.

        4. next_ghost

          @Thomas: If you’re trying to throw me off by repeating that totally unrelated nonsense about consumer protection like a broken vinyl record, it’s not gonna work. Get back on topic: national copyright law compatible with Berne convention creates massive legal uncertainty for its citizens.

          As for the entertainment industry (let’s call it MAFIAA for short), I’d like to see just one example where they even TRIED to do it right. Radio in early 20th century: MAFIAA sued multiple times and mostly lost. Cable TV: MAFIAA sued and lost. Betamax videotapes: MAFIAA sued and lost. Compact Casettes: MAFIAA didn’t sue but blathered how “Home taping is killing music.” Napster: MAFIAA sued and won. MAFIAA sued and won. YouTube: MAFIAA sued and mostly lost.

        5. Thomas

          Next_ghost – you are funny! As I specifically pointed out, the topic was about earning the right to ones labour, regardless of it is manual or intellectual, A fundamental human right that mr Falkvinge’s text unfortunately does not acknovledge.

          By the way,. I can recommend you to try vinyl records. The music becomes more involving and more relaxed, compared to the overcompressed CD and MP3 files.

        6. next_ghost

          @Thomas: And I’ve asked you if you’re OK with consequences of unifying the rules for both tangible and intangible things. I’m definitely not, because applying rules rules created and fine-tuned for tangible world to intangible things violates everyone’s rights to tangible property. Your desire to unify ownership rights to both tangible and intangible things requires destroying the basic human right to own tangible property. That’s what Mr Falkvinge is saying.

          But if you’re not going to answer my question, I don’t see any point in further discussion with you.

        7. scandinavianpirate


          “Small companies being bought is the normal process.”
          And if they don’t, what would happen..?

          As to the “fruits of ones work” argument:

          You have the freedom to sell your labour even without copyright.

          However you have no right to do a work once and then expect to get paid over and over indefinitely. Copyright is not about getting paid for one’s labour – it is about getting paid over and over for old work without having to do anything new.

    3. TG

      You may attempt to benefit from your labour (without guarantee of success) by rearranging your own property or making a contractual agreement with someone to rearrange their property (i.e. employment).

      You have no right to benefit when other people rearrange their own property.

      1. Thomas

        “Rearrange property”?? Please don’t waste your time, or mine, with stupid semantics? What are you trying to express? Please your plain, simple english. I am a simple guy, remember…

        1. TG

          Ok, when you build a steam engine, you transform and rearrange pieces of metal into a complicated arrangement that shunts steam around so as to serve a useful purpose. You own the resulting steam engine, not because it is a “fruit of your labour”, but because you originally owned the metal that you then rearranged.

          Suppose I buy one of your steam engines and study its construction. I rearrange metal that I own into a steam engine that resembles the one that you sold me. That steam engine is mine and I owe you nothing for it.

          If you build a computer program, you rearrange the disordered magnetic domains of a disk into a complicated arrangement that, together with your CPU, shunts electric charge around so as to serve a useful purpose. You own the resulting program, not because it is a “fruit of your labour”, but because you originally owned the disk that you then rearranged.

          Suppose I buy one of your disks and study its construction. I rearrange a disk of my own so that it resembles the one that you sold me. That rearranged disk is mine and I owe you nothing for it.

          Simple enough?

        2. Thomas

          Dear TG, I really do not understand why you are using a fuzzy language? “Rearrange pieces of metal”? Why not just write “build”?
          Anyway, you seem to be stuck in the old hardware economy, just like mr Falkvinge. Looking back to the good old days when “real men” had “real jobs”.
          The value of my labour has no correlation to the hardware and the value of the steam engine has no correlation to the hardware or the production cost. Same thing with the SW, there is no correlation between the HW and the value.
          Same thing with the ownership of the HW or production resources, both are totally irrelevant to the value.
          So – back to basic. In my opinion it is a fundamental right to earn the fruit of one’s labour. If I build a steam engine, that is my property to use, sell or share in any way and at any price I may decide. The same fundamental right applies if I write a text, music or SW, it is my property to use, sell or share in any way and at any price I may decide.
          This also means that I can choose to sell my steam engine, or my text, with any T&C’s that I want. The buyer on the other hand has the right to accept or not to accept my offer.
          This is called market economy, it has proved to work pretty good over the years.

        3. scandinavianpirate


          “So – back to basic. In my opinion it is a fundamental right to earn the fruit of one’s labour.”

          No it isn’t, since you have the right to sell your labour even without copyright legislation! If what you are doing has a value to people, they might as well pay you directly for the labour of creating the originals.

          There is No Excuse to keep charging for copies when the copying process has become so very cheap as it is today.

        4. TG

          Thomas, you accuse me of using fuzzy language while at the same time misusing words such as “value”. In the economic sense, value is a verb, not a noun. People decide how to use or exchange property depending on how they value the options available to them. Value is not some mystical substance that somehow attaches itself to things.

          And you offer no justification for the dichotomy you present between the example of the steam engine and the example of the computer program. Other than your distracting characterision of Rick and myself as hammer-wielding neanderthals, can you explain why it is ok for people to use their property to make copies of steam engines, but not ok to make copies of computer programs?

          And at the end you throw in the false implication that copyright is merely a contract between buyer and seller. It isn’t. You, as a seller, may indeed insist on contractual terms where the buyer agrees not to use their property to make copies. That is true both of software and steam engines. What such a contract can’t do is force all third parties to limit their property use in the same way. This is not free agreement in a market economy – it is coercion.

        5. Thomas

          TG & Scandinavian pirate – you are both mixing up the concepts of cost, price and value. You are stuck in the old-school cost-based HW economy. The rest of the world left that somewhere around 1970…. Almost 50 years back.
          There is no correlation between cost and value. The value of a steam engine is how much effiency improvements it can deliver to for example a factory The cost of steel and manufacturing is fundamentally irrelevant in terms of customer value. This is very obvious, neither of us has a clue on the manufacturing costs of the stuff that we buy, but we still assign it value. We pay more for one pair of jeans compared for another pair, just because we assign them a higher value. But there is no correlation to the manufacturing cost.
          Same thing with intellectual property, the value is what good it delivers. From a commercial perspective, a piece of software is making a company more efficient. The value of the software is the effiency it delivers. Regardless if the manufacturing cost is zero, just like the cost of steel is irrelevant to the value of the steam engine.

          With this piece of free education on modern economy, I leave this discussion. Welcome out from your cabins in the forest and embrace the new, exciting world, where a “real job” is about delivering intellectual value rather than steam engines :-)

        6. TG

          So no justification of why making a copy of a computer program is fundamentally different to making a copy of a steam engine?

          And by the way, what you are describing here is monopoly pricing power. It’s generally considered a bad thing.

        7. Thomas

          OK, a quick encore. Lesson 2 in post HW economy.
          We seems to agree that “intellectual property” has a substantial value to many products, even simple stuff like a pair of jeans. And we also seems to agree on that it is a fundamental right to enjoy the value and fruits of ones work.
          Back to the steam engine, actually a good example. A steam engine is really two fundamentally different products. One of the products is described by the value it delivers to the factory, for example production efficiency. The other product delivers a completely different value, the product is the blueprint of the steam engine. Useless to deliver effiency improvements in the factory. But a very valuable if you want to start your steam engine production.
          Two very different products, for two very different markets with two very different value propositions. The factury buys to obtain the value for production effiency, for a price and terms that reflect that value. Should someone want to buy the blueprint, that has a completely different value, and thus completely different price and terms.
          But both products represents the result of my labour, therefore it is reasonable that I have the full ownership for both products. From a customer perspective they buy one product or the other.
          Same thing goes for a piece of software or a text. Different values, different price if you want to use them or copy and resell.
          Very simple, just as if you buy the bookshelf Billy at Ikea. That does not give you the right to use the blueprint to produce Billy bookshelves.

          By the way, today Apple announced that they bought a small Swedish startup company. Yesterday ARM announced that they acquired a small Finnish startup company. This is business as usual. The examples with large companies that uses legal methods to kill small companies, I think Napster&, are not only a decade old but also outliers and exceptions. The reality is that protection of intellectual property is very important for small and medium sized companies. Therefore it is important for our economy and to create new jobs!

        8. TG

          “We seems to agree that “intellectual property” has a substantial value to many products, even simple stuff like a pair of jeans. And we also seems to agree on that it is a fundamental right to enjoy the value and fruits of ones work.”

          Actually, I don’t agree with those either of those statements, as should be clear from what I’ve already said. I believe that one has a fundamental right to one’s property – to occupy it, to use it, to trade it, and most importantly to rearrange it. If I own some wood then I should be perfectly free to rearrange it into a bookshelf that looks like one from Ikea. Anyone who tries to tell me that I can’t rearrange my property in a particular way is trying to seize partial ownership of my property. They are stealing.

          The idea that you espouse – that you have the right to seize the property of others because you feel that they are benefiting from some “value” that resulted from your labour, even though nobody contractually agreed to pay you for that labour before you performed it – is Marxist. It is the antithesis of capitalism.

          And who knows, maybe “intellectual property is very important for small and medium sized companies”. Maybe farm subsidies are very important for farmers. Maybe state military is very important for weapons manufacturers. Maybe child benefits from the state are very important for parents. Maybe tariffs and anti-immigration laws are very important for native workers. Doesn’t make them legitimate.

        9. Thomas

          @ TG Not sure that I follow you? Perhaps you have “rearranged” your thoughts and languge too far?
          I have not discussed doing anything with “property of others”. That is your own little discussion.
          Same thing with the importance of the protection of intellectual property for smaller companies. Originally you claimed that it was a problem for them, a claim that proved not to be correct. If this was not important, why did you bring it up in the first place? Perhaps your just wanted to “rearrange” the discussion, who knows…..?
          Once again, I am leaving the discussion. It is getting silly and stupid! Or perhaps I should write that I am rearranging my time in front of my keyboard? Just to fit the Orwellian Newspeak that apparently is popular by the pirates….

    4. next_ghost

      How about we put that “basic human right to fruits of one’s labor” to a test? Let’s say I walk up to your car and without your knowledge or permission I rebuild it into a perfect working replica of Batmobile (pick your least favorite version of Batmobile here). What would you owe me in that hypothetical scenario? Would I become the owner of your car? I suggest you look up the relevant law.

      1. Thomas

        Next_ghost – please don’t waste your time or mine with stupid and irrelevant scenarios.

        1. next_ghost

          Thank you for confirming that your supposed “basic human right” isn’t so basic or important after all.

  12. Trent McCauley

    Rick, what is the difference between “sunk cost” and “investment”?

    1. next_ghost

      Sunk cost is a failed investment.

      1. Thomas

        No, it has nothing to do with “failed investment”. Please do your homework.

        1. next_ghost

          Sunk cost is equivalent to failed investment within the context of Rick’s article. The broader meaning of “sunk cost” is not applicable within that context.

    2. Trent McCauley

      If sunk costs are always irrelevant to product value, are any investments ever relevant?

      1. Thomas

        There is no correlation between cost and product value. No correlation whatsoever.

        1. scandinavianpirate

          On a free market which has competition, cost and product value should approach each other. Anything else is monopolies or cartels.

        2. Trent McCauley

          Not even the cost of (re)production?

        3. Trent McCauley

          No even the cost of (re)production?

        4. Thomas

          Scandinavian pirate – sorry, but your statement is simply not correct. There are some markets where the price is approaching the manufacturing cost, but they are exceptions and outliers.
          Like commodities, where there is no innovation and very simple products. Nails or paperclips.
          Actually – there is an interesting correlation. In markets/products that are driven by innovation and intellectual property, the value of the product will never be correlated to the cost. The more innovation, the less correlation. And vice versa, with less innovation the price will be aligned with the cost.
          An iPhone for example, costs about 125 dollars to manufacture and the price is still about 1000 dollars. A quick and simple example that clearly falsifies your claim.

        5. next_ghost

          @Thomas: That has nothing to do with innovation. That’s a perfect example of market distortion caused by (patent) monopoly.

        6. TG

          Yep, next_ghost is absolutely right here.

          Thomas, what you are saying here is, “the artificial monopoly of copyright/patent allows me to get away with charging the consumer slightly less than the cost to them of not having the thing”.

          In a free market, this wouldn’t happen. Free-market competition drives the price as close to production cost as the producers can bare. Profit margins are squeezed to zero and the only way that competitors can regain profitability is by making their production process even cheaper, or developing a better product before the competition have a chance to copy it.

          In other words…. innovating.

          I’m generally not in favour of utilitarian arguments, but you yourself have just spelt out the utilitarian case against the system you claim to favour. Well done.

        7. Thomas

          Monopoly?? How can you claim that the smartphone market should be a monopoly? That is a stupid claim, obviously not correct.
          Even more stupid to argue that Apple, with a 15% market share in the smartphone market should have a monopoly advantage.
          Sorry – but please do your homework!

        8. TG

          Really, this comment is so dishonest, and frankly dumb, that I have reservations over whether to bother responding to it.

          There isn’t a monopoly covering smartphones in general (luckily). The monopolies cover certain aspects and features of smartphones. Of course, you already knew that, but since you have no real arguments, you have to resort to these stupid and dishonest distractions.

          And yes, it is a monopoly. Hence Samsung’s product being banned in the United States recently.

        9. next_ghost

          @Thomas: Apple spends more money on patent litigation than it spends on actual research and development. Source:

        10. Thomas

          TG- cool , you are now also rearranging your langauage to fit better with your ideas. However, I think it will be tricky for you to rearrange the reality to fit…..
          Anyway there is no monopoly in the smartphone market, just look at the numbers and how the market has changed. So going back to the original discussion, there is no correlation between price and the manufacturing cost.
          Another example is Manolo Blahnik shoes, there is obviously no correlation between the production cost and the price. Or do you want to rearrange your language and claim that the shoe market is also a monopoly market?
          This also means that your claim that the price should be aligned to the cost of production is simply not correct. Especially since we talk about markets driven by innovation.

  13. RL

    Although I agree that markets should be free of monopolies, but I do not agree with your definition of the capital, as wether being a good or a service.

    In praxeology, the irrefutable demonstration is established that capital is constituted of 3 things: goods, work and recipe. Please refer to Rothbard (fundamentals of human action)

    The recipe itself has a value and can be sold. This makes your starting assumptions false. Therefore the whole discussion has to be rebuilt.

    1. next_ghost

      I’d like to recommend taking a class in formal logic. After you do, you’ll find those “irrefutable demonstrations” from praxeology painfully hilarious and naive.

      1. RL

        You are right, the expression “irrefutable demonstration” is inappropriate.

        However, your comment does not provide any argument that invalidate any of the axioms of praxeology. To me, they are still valid.

        The recipe is part of the capital. Therefore, freedom of information is an issue of voluntary good will in the private domain. If people are willing to pay for a privately owned recipe, well this is an issue of mass behavior and market, not an issue of rights. Just don’t buy the recipe and wait for the market to readjust.

        Complementarily, freedom of information should be a mandatory issue in the common proprety domain.

        1. next_ghost

          > However, your comment does not provide any argument that invalidate any of the axioms of praxeology.

          That was not my intention. I’m simply suggesting that you should learn more about logic. Every single praxeology peddler I’ve seen was completely clueless about logic and you seem to be no exception, given your use of “sciencey” terminology.

          But I’ll give you a proper terminology lesson because I’m going to need it later in our discussion below.

          1) Definition. Definition is used to attach a clear and unique name to some abstract object with certain properties. Example: “Even number. An even number is an integer which is divisible by 2.”

          2) Statement. Statement is a formula of various complexity which has truth value (true/false). It consists of primitive symbols (a variable which has truth value and constitutes a statement on its own) and operators which combine one or more other statements into single truth value. We’ll use only the following operators: Not, Or, And, Implication (=>) and Equivalence (). Technically, we could do with just Not and Implication because all the others can be expressed using just those two but it’s easier this way. If you’re unfamiliar with any of those operators, ask me to explain right away. The truth value of a statement may differ depending on what you substitute for its primitive symbols.

          3) Conjecture. Conjecture is a statement presented without proof. It’s basically an invitation for others to try proving it.

          4) Axiom. Axiom is a statement assumed to be true without needing any proof. It’s a foundation hanging in the air upon which you can build something. However, you need to find some solid ground for that foundation in order to use what you’ve built. For example, if you take the statement “All numbers are even” as an axiom, you can build something which can be useful when applied to sets containing only even numbers but it won’t work in general.

          5) Theorem. Theorem is a statement which is proven to be true regardless of what you substitute for its primitive symbols. It may depend on some axioms. If it doesn’t depend on any axioms, it’s also called Tautology.

          6) Theory. Theory is a set of axioms and all theorems derived from those axioms. The word “theory” has different meanings in other branches of science.

          7) Proof. Proof is a set of steps where every step is either an axiom or it’s derived from previous steps using the rule of deduction. The last step of a proof has to be the statement you’re trying to prove.

          The rule of deduction works like this. You have two statements which are either axioms themselves or derived from axioms using this rule:
          1) X
          2) X=>Y
          Then you can derive a new statement: Y

        2. next_ghost

          Looks like the comment filter ate my Equivalence operator :-/ Let’s try again: <=>

        3. RL

          Thanks for these methodologic details. I’m more familiar with logics applied to mathematics and informatics thant logics applied to philosophy.

          Because of the logic described in La Méthode de Descartes, I firmly believe that truth exist and that (in my own words) information exist.

          That’s the most basic theorem of the universe: information exist. Proof: You can’t deny the existence of information without communicating an information…

          Second theorem: conscious mind exist. Proof: You can’t deny the existence of conscious mind without experiencing it’s absence through a consciuos mind…

          Therefore, conscious mind = information.

          Information can be expressed with mathematics. (Is a proof required?) Even unreal/imaginary and complex objects can be expressed with maths (see complex numbers).
          Therefore, information obeys to mathematical logic. Even imagination obeys to mathematical logics (quite fancy mathematics though…)

          Since information is the only thing we are sure exist, we can make the theory that any object in the universe is made of information and obeys to mathematical logics.

          Therefore, human mind obeys to mathematical logics.

          The axiom of human action is also immanent in that sense. If laws of nature governs interactions of matter, interactions of matter governs human action, human action governs economy.

          I’m not arguing that the applied theories of austrian economists are all good. I still believe that praxeology and the human action axiom is the only valid tool for economy.

        4. next_ghost

          That proof doesn’t really prove anything. If there’s nobody to deny existence of information, no information gets communicated. If we aren’t really here, there may be no information either. Again, it falls apart on a reference to someone who makes the statement.

          Also, could you define what you mean by “information”?

        5. RL

          Information is the observation of the existence or inexistence of something. This is a real information = 1 or 0. Observing your own consciousness indicate that your consciousness exist. You can’t observe the absence of your consciousness without prior-being consciuos to observe it.

          Observing your senses doesn’t prove that the universe or anything outside of you is real (you could be in a matrix), but at least it proves that complex/imaginary objects outside of you exist (you are aware you’re inside a matrix). This is an imaginary information = i.

          From there, the whole complex math universe exist… and so on.

          Look… you can’t deny that you exist without existing to deny it… so you end up in an absurd reasonment. Every denial only enforce this truth or falls in absurdity. The cogito is the ultimate answer to Socrate’s irony.

        6. next_ghost

          *sigh* I’ll try to make my point as simple as possible: Assuming there was no intelligent life 13 billion years ago and there were no supernatural entities either, did information exist back then?

          Your proof cannot answer that question.

        7. RL

          I agree.
          In fact, nothing ever answered that question except religions.

          But the next question is: did any information existed before I existed? Or, did my consciousness ever existed before my actual memory? Did the matrix existed before I was in it, or is it me that creates it?
          Is one’s consciousness a substance independent fron the universe? Or as the deep space neutrino can have influence on my mind by quantum entanglement., is the consciousness a vectorial sum of the whole universe interactions relative to a single point of convergence?

          I told you we’d get into a metaphysical debate.

        8. next_ghost

          Those are interesting philosophical questions but for another debate. Everything I’ve said here so far about logic was purely from mathematical point of view and I want to keep on that track. So allow me to revisit that proof one more time and show you in detail what’s wrong with it. Here’s the theorem and its proof one more time:

          “Information exist. Proof: You can’t deny the existence of information without communicating an information…”

          If you look carefully, you’ll notice three silent assumptions in that proof:
          1) There exists an entity E which is capable of denying existence of information.
          2) There are other entities to which E can communicate that denial.
          3) Communication constitutes passing of information.

          I’d happily accept a proof which clearly spells out those assumptions and correctly derives the conclusion from them. Not spelling out all assumptions invalidates the proof because it often leads to belief that you’ve proven a much stronger statement than you really did. For example, it’s not clear from the formulation of that theorem or its proof whether information exists independent of the observer or if it proves only existence of information which originated from the observer. Such ambiguity is unacceptable.

          This is one of many common problems found in naive proofs. Now I’d like to challenge you to go through a few of Rothbard’s proofs and find silent assumptions in at least three of them. You shouldn’t have any problem finding them because when I was reading Man, Economy and State, silent assumptions were all over the place. If my explanation wasn’t clear enough, don’t hesitate to ask.

        9. RL

          For a statistically recognized proof about the cogito and the existence, you can refer to La Méthode. I’m just trying really hard to synthetize it in my own words. Unfortunately, you can onbly be satisfied by the whole book. And I won’t transcribe the whole book here!

          Silent assumption is an issue of communication and of message entropy (Shannon entropy).

          If Rothbard had to carefully build his text without using any silent assumption, the book would have had 250 tomes.

          In criticizing the silent assumptions, are you making a silent assumption that any silent assumption makes a statement false?

          Just to play the game, the entity E cannot deny the existence of information. You cannot imagine that you don’t imagine. E could TRY to deny the existence of information by communicating the information of denial to himself, but he would always fail. Nothing proves that any other conscious entity than E exist. I agree with assupmtion 3.

        10. RL

          Example: it takes less bits of information to write “dog” than “mammal”, but the word “dog” contain implicitely the information that it is a “mammal”. Thus a silent assumption is a compression of data, not necessarly a compression of false data.

          The game then would be to decompress the whole text of Rothbard and verify where false data comes in. (a huge work of analysis)

          I agree that some false data may have been introduced in the text through compression. Nevertheless, the idea of having material + work + recipe = capital seems correct to me.

        11. next_ghost

          Actually, if Rothbard did all proofs without silent assumptions, he could fit his books into less than half the space because he could throw away 20 pages of further straightening out after each proof.

          > In criticizing the silent assumptions, are you making a silent assumption that any silent assumption makes a statement false?

          No. I’m saying that any silent assumption in the proof means that the statement is still a conjecture, not a theorem.

          I won’t argue with the last paragraph because you got the point and this is just a minor difference between our definitions of the words “deny” and “communicate”.

        12. next_ghost

          > Example: it takes less bits of information to write “dog” than “mammal”, but the word “dog” contain implicitely the information that it is a “mammal”. Thus a silent assumption is a compression of data, not necessarly a compression of false data.

          This is not an example of silent assumption. “Dog” (in the biological sense) is defined as a mammal which has some additional special properties. Example of a silent assumption would be if you went in the opposite direction. You would speak about a mammal in the proof, but at the same time you’d silently assume that the mammal in question has properties specific for a dog.

          You don’t have to analyze all of Rothbard’s writings, just find a few examples in three different proofs to practice this important skill.

          > Nevertheless, the idea of having material + work + recipe = capital seems correct to me.

          It may be correct. But it still doesn’t mean that attaching a price tag to recipes is beneficial for the market.

      2. RL

        Praxeology says that all economic propositions which claim to be true must be shown to be deducible by means of formal logic from the incontestably true material knowledge regarding the meaning of action.

        So I wait for your arguments.

        1. next_ghost

          OK, write the axiom of human action and its proof and I’ll demonstrate what I’m talking about. I won’t write it myself because I would probably get accused that it was a strawman. Also make it your best shot because I won’t give you a second chance to rephrase it if you claim you screwed up the first time (a.k.a. “No TRUE Scotsman…”)

        2. RL

          We’re going to get stuck in the never ending metaphysical debate about determinism, because the main axiom of praxeology is that all human action is rational.

          A neutrino from deep space travel through the atmosphere, through skin and collides with an electron moving across the axon of a neuron, thus having an influence on the course of one’s mind.

          Rational action is the deterministic result of a mathematical-rigid transfer function over a complex uncontrolled stimulus. And economy is the reflex of that.

          What seems to be irrationnal is only the expression of the assymetry of information for an observer overwhelmed by the complexity of nature (butterfly effect). Even the ego of an individual can be overwhelmed by his own unconscious super-ego.

          So, the axiom of praxeology does lead to fundamental economic laws of nature. One must still be cautious in how to interpret these laws.

          Nevertheless, I still believe that the capital is composed by 3 things: 1- goods/material resources, 2- work/service and 3- recipe.

        3. next_ghost

          I won’t bother with any metaphysical crap. Just go ahead and write the proof. If it’s the usual one, I can shred it to pieces just by pointing out that it depends on who tries to disprove the axiom.

        4. RL

          I wrote the axiom.
          “all human action is rational”

          And the proof is Cartesian.

          Maybe i’m wrong, but then tell me how can you create a capital without any of these 3 things:
          1- goods/material resources, 2- work/service and 3- recipe.

        5. next_ghost

          Can you define “capital” and “recipe” (particularly its relationship to work/service) for me so that we’re on the same page?

        6. next_ghost

          BTW, that Cartesian proof doesn’t work when the entity which denies rationality of human action isn’t human. A statement may not refer to itself, how it is presented or who presents it.

        7. RL

          (goods/material resources) + (work/service) + ( recipe) = capital

          (Stick + rock) + (energy from hands + time) + (idea of assembly) = hatchet.

          (guitar+recording device) + (energy from hands + electricity for devices+ time) + (idea for a song + technical skill to operate devices) = music album

          How could an unconsciuos entity deny the consciousness of another? This is absurd!

        8. next_ghost

          Those examples don’t really help me understand what you mean by “capital” and “recipe”. Depending on how broad or narrow the definition of “recipe” is, it may be possible to create capital without recipe using just work and goods/materials.

          Where did you get the idea that an entity which isn’t human must be unconscious? That doesn’t follow. But then again, teaching the counterexample to a parrot and letting it repeat my words all day long removes my purposeful behavior just enough to break the proof.

        9. RL

          Cogito ergo sum: I think therefore I am. Lte’s just say thant any conscious entity (human or not) cannot deny it’s own existence. As as experience of the universe could be an illusion, we cannot deny that information exist outside of us. In mathematics, the only way to deal with fractal complexity is in mixing two opposite objects: imaginary and real. Unless you do that, you get stuck into an infinite sigging.

          Abour the recipe, let’s just say that it is what makes a difference between usine material and work to pile up a useless mountain of concrete and steel rods and building a usefull structure.

          I’m sure you get what I mean. I don’t want to skimp about definitions of definitions and I’m tired of this Socratic irony game. This is just getting both of us stuck into the fractal structure of our own minds.

        10. next_ghost

          Thanks, that’s a clear enough definition of “recipe” for me. “Work/service” and “goods/material resources” are also clear. Could you provide a similarly clear definition of “capital” so we can finally discuss those things?

          No, I don’t see what you mean. I don’t understand in the slightest why you brought up the paradoxes of questioning our own existence into a discussion about proof that “all human action is rational”. Those paradoxes don’t apply to that proof because the proof operates in a much narrower scope which allows for questioning from the outside. In the case of questioning our own existence, there is no outside.

        11. RL

          If the universe (including any concept of parallel dimension or complex structure) is constructed on logical laws of mathematics (including real and imaginary numbers) , and IF the human mind is part of the universe, then the human mind has to be rational.

          If you believe anything can exist outside the universe, then you are falling into the field of religion. No rational debate is possible there.

        12. next_ghost

          I can see how that implies determinism of human mind (provided for extremely complex internal state of human mind which makes that determinism very unpredictable). I don’t see how rationality of human action should follow from that determinism.

          I didn’t say “outside the universe”. The statement we’re talking about is this: “all human action is rational”. In this case, the “outside” is defined as “anything non-human that can deny rationality of human action without being directly instructed to do so by a human.”

  14. highks

    I think the copy of a movie or music album, although not a physical good, is still a service provided by the artist who made it. If it wasn’t, then every movie or music album would be equally good, or irrelevant.
    The fact that there are some more and some less popular movies or music albums shows that the content of these bitstreams is very relevant to their value, because a good movie provides the service of entertaining me, while a bad movie doesn’t.

    In my opinion we can discuss the value of such a service, but we cannot say that the artistic content of a digital bitstream doesn’t have any value at all.

    I am totally with you that today’s copyright laws are mostly wrong, but stating that every work of art in digital form is worth nothing and nobody should be paid for it at all is just against my sense of fairness.

    I am a very happy customer of bandcamp, which I find is a really fair choice. You can listen to any full album in full quality as long as you want, but you can also buy it for a small amount of money – or give some more money if you like to. Most of the money goes directly to the artist, there are no middlemen involved (as far as I know)
    This just feels right to me, because people with no money can still listen to the music for free, but to get the files you have to pay a little for the artist and the site. What can be wrong about that?

    I agree with most of your arguments, and I certainly don’t like the copyright industry as it is, but denying a musician or filmmaker any kind of payment for the service they provide just doesn’t feel fair and right to me.
    Digital copies of music or films are just a new category of services that did not exist before computers were invented, so they do not fit the classic categories like “product” or “service”. That doesn’t mean they’re worthless neither!

  15. author

    The thing is, doesn’t matter that you can come up with some “refutation” of intellectual property, by not satisfying (obviously) all the qualities of physical properties. It’s LAW. In a way it’s like saying that no one has the “right” to live, there’s no such physical thing as a “right”, it’s all a bogus invention of the weak to protect themselves, but in the real world, if one can kills someone, he can kill someone, “rights” don’t make this impossible. Likewise “rights” won’t ensure you keep your physical “properties” as well, if you don’t have a band of people to protect this “property”.

    Happens that the government is this band of people, who asserts “rights” that aren’t “physical truths”, but things society thinks worth to “hold as if were true,” and to enforce, punish violations of such agreements.

    The same applies to intellectual property rights. These were conceived to make this kind of work something minimally feasible to make a living or to have something more than coins or a few dollar bills thrown in a hat.

    The very fact that you want to download the work of authors testifies to the fact that YOU VALUE such work. But you don’t want to pay. Guess what, people need to make money for a living and if this sort of work, that YOU WANT to use/”consume” (but not pay for) doesn’t pay the bills, because no one wants to pay anymore, then new work of this kind will be ever more rare, eventually you will only have the works from the past “copyright era”, and the public domain stuff that apparently isn’t enough for you, in either quality or quantity. All subsequent new work will be only of amateur quality, and/or vastly more rare.

    1. Rick Falkvinge

      This is an interesting response. I quote:

      It’s LAW.

      First, just because something is in the code of law at a certain point in time does not make it just or correct. I’m sure we can all think of numerous examples. Good and lawful are completely different concepts.

      Second, and more importantly, this blog is about policymaking. What the law says is completely irrelevant. These articles and the discussion is about what it should say, and that’s not a purely drydock academic discussion as I founded a movement that’s been elected to legislators on multiple levels by now.

      Third, this article is not about what the law says at all, but what economics apply to the concept of sharing culture and knowledge – specifically how property is exchanged (or services rendered) at a sale. That, in turn, is important to make good policy and next-generation laws.

      The rest of the comment appears geared to assert that culture must have monopolistic protection (copyright monopoly) to be created in the first place, which is plain nonsense on every conceivable level. This can be observed in many ways, but one of the easiest is to note that we have created culture since we learned to put red paint on the inside of cave walls and bang two rocks together in rhythm.

      Also, the “you’re just doing this because you don’t want to pay” argument is just insulting bullshit. Drop that. This was never about the money, and that should be obvious from anything past the most cursory or prejudiced glances.


  16. moogie

    “into a more convenient format, typically MPEG-4 encapsulated in a Matroska container”

    I suggest leaving out jargon so that your article remains widely accessible.

    Not all your readers may know what “MPEG-4 encapsulated in a Matroska container” is, and it’s not really all that relevant to your argument.