Free Ride: An Institutionalist Analysis of Information in the Internet Age

The distribution mechanisms for intellectual property are undergoing radical change. Until recently, intellectual property distribution was constrained by the technology of mechanical reproduction: LPs had to be pressed, CDs had to be burned, books and other written works had to be physically reproduced, videos and movies had to be copied onto tape or film stock, software had to be put on discs, and all had to be packaged and shipped to retailers and consumers. Under these technological constraints, intellectual property could be produced and sold in the same manner as shirts, footballs, and gallons of gasoline: all items were divisible, exclusive, and depletable and hence could be success- fully sold through private markets. The Internet, combined with high-speed modems, large-capacity disc drives, data compression algorithms, and the digitization of much information, is revolutionizing the markets for intellectual property. Digitized information is indivisible, non-exclusive, and non-depletable and hence is a public good by definition. As is commonly under- stood, the production of public goods will wither in private markets as sellers are unable to compel enough consumers to pay for the enjoyment they receive. While the produc- tion of new music, television programming, and motion pictures may be considered less urgent than that of some public goods such as national defense, these goods and services may nonetheless contribute greatly to our culture and welfare, and the production of new software and certain other intellectual property (such as scientific knowledge) often