Thursday, March 26, 2009

To Share or Not to Share (II)

I originally wrote this entry on August 27, 2004, and published it on

The vastly prolific Judge Richard Posner's musings regarding a recent court decision on file-sharing ("In the Wake of Grokster") has led to a torrent of great commentary by his readers.

In their commentary, Luka, Ernest Miller and Matthew Saroff have made interesting technical points to demonstrate the serious challenges police crackdown faces as a prevention tool, and I certainly agree with Luka's critique of the ideal-world equilibrium analysis offered by James McDonnell.

McDonnell claims that if file-sharing could be stamped out, the no-file-sharing world would be possible to maintain through minimal enforcement because such a world would be one of the equilibrium worlds (that he postulates). Luka notes how the diversity and growth of file-sharing alternatives make such ideal-world analysis less than satisfactory. He gives Orkut as one of the non-trivial examples.

Referring to unsuccessful prohibition attempts in history, Raoul and Doug Munger focus on the limits of enforcement in general. ("The RIAA has only sued 4000 people out of 60,000,000," writes Raoul. "It's a joke.")

In his original blog, Judge Posner has used the "expected utility" approach of the economists to analyze the ancillary effects of a recent DoJ crackdown on a file-sharing network. (I'm coining the phrase "expected utility" for explanatory purposes.) The "expected utility" approach says, basically, that economically rational agents will look at the probabilities of outcomes (will I get punished or not if I file share) and multiply these probabilities with the value of each outcome (the pain of getting arrested vs. the gain of thousands of more free songs) and determine the "expected" utility of some action.

On the limits of such "expected utility" analysis, see Richard Thaler's The Winner's Curse: Paradoxes and Anomalies of Economic Life, Chapter 6 (Princeton University Press, 1992). The point Thaler makes is that people do not always see decisions according to the "expected utility" approach. (I will say more on this in a separate log.)

. . . Thanks to honorable Judge Richard Posner for having started the dialog on Grokster. As a bystander, I thoroughly enjoyed the conversation as it unfolded.

Earlier, I'd given a quick review of reports on the Grokster case and pointed to the DoJ crackdown on a file-sharing network that followed, almost immediately.

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