The measure of economic success is the size of the economy, typically measured as the gross domestic product (GDP).
Wikipedia enlightens us:
GDP refers to the market value of all final goods and services produced within a country in a given period. It is often considered an indicator of a country's standard of livingThe digital revolution has raised some very awkward problems surrounding the protection of intellectual property. I wrote about this last week as the Knowledge Economy Paradox. Digital innovation seems to thrive on the absence of monetary barriers to re-use, as the open source software community have shown. Similar applies to visual arts with so called mash-ups - remixing photos, art, video and music to create original works as a derivative of other artists' works.
The paradox comes about because without a legal mechanism to protect digital content it's impossible to trade intellectual property, therefore the result of the innovation can't be monetised and count towards a country's GDP.
Since many see GDP as an indication of a country's standard of living it has immense political overtones. This explains why governments, as well as rights holders with large IP portfolios(!), are keen to see protection of intellectual property strenthened.
The "think of the poor creative artist" argument sounds pretty reasonable, but it's a minor issue compared to the hundreds of billions at stake in the corporate IPR markets. Besides, when recording studios had a complete monopoly on the industry, music lovers faced escalating album prices whilst many artists continues to receive a pittance in royalties.
For the creative market to work properly, including fair rewards for artists and creators, we might need to look at alternative mechanisms to GDP for measuring how such products improve our standard of living.
I call this the Enrichment Economy - an as-yet undefined measure of how the creative works we consume for free improve our lives. Whether it's reading a 19th century novel now in the public domain on your Kindle via Project Gutenberg or listening to a public domain audio book by Librivox; researching using the Creative Commons Wikipedia or enjoying a satirical mash-up of a popular song.
The stuff we get for free makes us happy and therefore improves our standard of living. But it doesn't count towards GDP so it can't be measured and governments can't tout their country's successes.
Clay Shirky in his book Here Comes Everybody: The Power of Organizing Without Organizations uses Coase Theorem to explain why there are some worthwhile activities that the internet enables people to achieve through collaboration, but remain commercially non-viable due to the cost of organising the collaborators. He uses the concept of a Coasian Floor to describe these. This excellent podcast explains more.
Using money to reward creation is in some extent flawed for three reasons:
1. The more you pay someone for a creative task isn't necessarily proportional to the results. See Dan Pink on the surprising truth about what motivates us.
2. Strong protection of intellectual property can inhibit innovation (see Knowledge Economy Paradox), and contribute to making the transaction cost of collaboration far outweigh the value of the output of collaboration (Shirky, Coase)
3. Now that economies have abandoned the gold standard, the only physical limiter to the value of currency in circulation is the value of goods. Once intangible assets are included in the economy there's no physical limiter whatsoever. Intellectual property like all other assets is worth what a buyer is prepared to pay, but when it sits on a corporate balance sheet it's worth a best-guess estimate.
Just a note on point 3. I compiled the graph below for a different reason, but I was struck by the red line. It's the growth in UK GDP since 1900. Is the massive rise since the 1970's really reflective of an equivalent massive increase in the standard of living? Or is GDP as an economic indicator now unbound and spiralling upwards due to the ethereal nature of Intellectual Property?