The Economist interviewed me about the settlement at some length, and made a podcast that I quite like. It recapitulates fairly painlessly (it’s 13 minutes) some of things that I’ve been saying about the Google lawsuit and settlement for some time.

And, for something completely different and arguably more important, Paul Krugman has a superb piece entitled “How Did Economists Get It So Wrong” in the New York Times Magazine of September 6. What’s remarkable is how economists got it so wrong 70 years after Keynes got it so right. Anyhow, this is a testimonial for Krugman’s piece from an admiring economist.

Or, for a better analogy, suppose that your ship is sinking, through a hole that that is 10 feet in diameter.  How about saving on repair costs but inserting a plug that covers only 75 percent of the leak?  Sound like a good plan?  Not so much.

The reason that we need fiscal stiumus is that monetary policy is impotent to provide sufficient stimulus (not generally true, but true now, and essentially no one disagrees with this view).  With an unemployment rate of 7.6 percent, the economy is well below its potential level of output — we are about five percent below potential GDP, and the situation is getting worse by the hour.  The current cost of putting unemployed resources to work in this setting is very low, because the alternative is that those resources will not be used at all. Deficit-financed spending, public and private, can create current income and will reduce unemployment and the risk of future unemployment.  Some of the income generated by the stimulus, and some of the stimulus itself, will go into investment, and hence lead to increases in future income.  The income gains are valuable in themselves, and will offset a good deal of the taxes required to service the debt.  This analysis would be completely different if the economy were somewhere near full employment.  In that case the new spending, both private and public, would substitute for other activity, and the increase in the deficit would reduce investment and growth.  (To go back to the sinking ship analogy, patching a leak where there is no leak is simply a waste of resources.)

Everything that I have said above is oversimplified, of course, but the public discussion of the size and shape of the stimulus package seems to be missing the point.  The point isn’t to have the cheapest stimulus package possible; the point is to align the size and timing of the package with the size of the problem.  The most immediate and effective form of stimulus is to support state governments, because their revenues are falling and they will be forced, by their own constitutions, to reduce spending and lay off workers.  So the immediate stimulus effect of a dollar of support for state spending is a dollar, growing to about two dollars once the effects percolate through the economy.  (Note that what is really going on is the avoidance of a dollar’s spending reduction, growing to two dollars, at the worst imaginable time.)  In this context, Congress gets all sanctimonious about waste in government.  Halleluljah!

Paul Krugman’s recent columns and blogs on this subject have been excellent, by the way.  I commend them to the world of libraries.

And one more thing.  If we happen to make a mistake and overstimulate the economy, monetary policy will be perfectly effective in reining things in.  One way of characterizing the goal of fiscal policy in the current crisis is to restore the economy to a place where monetary policy can work.  The task is urgent.

—–

To the editors:

My colleague and friend Robert Darnton is a marvelous historian and an elegant writer. His utopian vision of a digital infrastructure for a new Republic of Letters (Google and the Future of Books, NYRB Feb. 12) makes the spirit soar. But his idea that there was any possibility that Congress and the Library of Congress might have implemented that vision in the 1990s is a utopian fantasy. At the same time, his view of the world that will likely emerge as a result of Google’s scanning of copyrighted works is a dystopian fantasy.

The Congress that Darnton imagines providing both money and changes in law that would have made out-of-print but in-copyright works (the great majority of print works published in the 20th century) digitally available on reasonable terms showed no interest in doing anything of the kind. Rather, it passed the Digital Millennium Copyright Act and the Sonny Bono Copyright Term Extension Act. (More recently, Congress passed the Higher Education Opportunity Act, which compels academic institutions to police the electronic environment for copyright infringement). This record is unsurprising; the committees that write copyright law are dominated by representatives who are beholden to Hollywood and other rights holders. Their idea of the Republic of Letters is one in which everyone who ever reads, listens, or views pretty much anything should pay to do so, every time.

The Supreme Court, which was given the opportunity to limit the extension of the term of copyright, which was already far too long (like Darnton, I think that 14 years renewable once is more than enough to achieve the purposes of copyright) refused to do so (with only two dissenters) in Eldred v. Ashcroft, decided in 2003. Instead, it upheld legislation that, contrary to the fundamental principles of copyright, provided rewards to authors who are long dead, preventing our cultural heritage from rising into the public domain,

In short, over the last decade and more, public policy has been consistently worse than useless in helping to make most of the works of the 20th century searchable and usable in digital form. This is the alternative against which we should evaluate Google Book Search and Google’s settlement with publishers and authors.

First, we should remember that until Google announced in 2004 that it was going to digitize the collections of a number of the world’s largest academic libraries, absolutely no one had a plan for mass digitization at the requisite scale. Well-endowed libraries, including Harvard and the University of Michigan, were embarked on digitization efforts at rates of less than ten thousand volumes per year. Google completely shifted the discussion to tens of thousands of volumes per week, with the result that overnight the impossible goal of digitizing (almost) everything became possible. We tend to think now that mass digitization is easy. Less than five years ago we thought it was impossibly expensive.

The heart of Darnton’s dystopian fantasy about the Google settlement follows directly from his view that “Google will enjoy what can only be called a monopoly … of access to information.” But Google doesn’t have anything like a monopoly over access to information in general, nor to the information in the books that are subject to the terms of the settlement. For a start (and of stunning public benefit in itself) up to 20% of the content of the books will be openly readable by anybody with an Internet connection, and all of the content will be indexed and searchable. Moreover, Google is required to provide the familiar “find it in a library” link for all books offered in the commercial product. That is, if after reading 20 percent of a book a user wants more and finds the price of on-line access to be too high, the reader will be shown a list of libraries that have the book, and can go to one of those libraries or employ inter-library loan. This greatly weakens the market power of Google’s product. Indeed, it is much better than the current state affairs, in which users of Google Book Search can read only snippets, not 20% of a book, when deciding whether what they’ve found is what they seek.

Darnton is also concerned that Google will employ the rapacious pricing strategies used by many publishers of current scientific literature, to the great cost of academic libraries, their universities, and, at least as important, potential users who are simply without access. But the market characteristics of current articles in science and technology are fundamentally different from those of the vast corpus of out-of-print literature that is held in university libraries and that will constitute the bulk of the works that Google will sell for the rights holders under the settlement agreement. The production of current scholarship in the sciences requires reliable and immediate access to the current literature. One cannot publish, nor get grants, without such access. The publishers know it, and they price accordingly. In particular the prices of individual articles are very high, supporting the outrageously expensive site licenses that are paid by universities. In contrast, because there are many ways of getting access to most of the books that Google will sell under the settlement, the consumer price will almost surely be fairly low, which will in turn lead to low prices for the site licenses. Again, “find it in a library,” coupled with extensive free preview, could not be more different than the business practices employed by many publishers of scientific, technical and medical journals.

There is another reason to believe that prices will not be “unfair”, which is that Google is far more interested in getting people to “google” pretty much everything than it is in making money through direct sales. The way to get people to come to the literature through Google is make it easy and rewarding to do so. For works in the public domain, Google already provides free access and will continue to do so. For works in the settlement, a well-designed interface, 20 percent preview, and reasonable prices are all likely to be part of the package. Additionally, libraries that don’t subscribe to the product will have a free public terminal accessible to their users. This increases the public good deriving from settlement both directly and by providing yet another distribution channel that does not require payment to Google or the rightsholders.

The settlement is far from perfect. The American practice of making public policy by private lawsuit is very far from perfect. But in the absence of the settlement – even if Google had prevailed against the suits by the publishers and authors – we would not have the digitized infrastructure to support the 21st century Republic of Letters. We would have indexes and snippets and no way to read any substantial amount of any of the millions of works at stake on line. The settlement gives us free preview of an enormous amount of content, and the promise of easy access to the rest, thereby greatly advancing the public good.

Of course I would prefer the universal library, but I am pretty happy about the universal bookstore. After all, bookstores are fine places to read books, and then to decide whether to buy them or go to the library to read some more.

Paul N. Courant

Note: This letter represents my personal views and not those of the University of Michigan, nor any of its libraries or departments.

My reasons are all related to a general point of view about commerce, one that is highly unoriginal (having, famously, been well articulated by Adam Smith in 1776) but powerful nonetheless. The profit motive often leads to great things, and also to good small things. It’s useful to have people out there trying to make money, especially if they are trying to make money by creating works of value, rather than by defending business models and manipulating legislatures to preserve monopolies or squelch competition. As I cannot imagine anything that I write on this blog providing the key to anyone’s predatory monopolies, the remote possibility that what I write could be used in a way that would generate monetary value carries with it the associated possibility that it will be of social or personal value to a user or a reader. The more use the better, and the more that people are looking for customers and users, the better.

I also have a more political motive. I have been known to criticize the behavior of publishers from time to time, but I would not want it thought that I am generally opposed to commerce, or commercialization, and I fear that some people involved in commerce see the “Non Commercial” license as synonymous with “anti-commerce.” It’s okay with me if someone makes some money from my work, even when I don’t. And if the new use is clever or innovative, that’s even better.

The second reason, also closely related, has to do with my attitude towards copyright law. If you believe, as I do, that the purpose of copyright is to “Promote the progress of science and the useful arts”, then it is more important that the work be out in the world being read, and contributing to a larger discourse, than that strangers not be able to make money from it. One maximizes the influence of the work by maximizing potential uses of the work, recognizing that commercial uses have just as much power to promote progress as non-commercial uses, and recognizing that the constitutional basis of copyright — authorizing Congress to grant monopolies for a limited period — contemplated such uses from the get go. (Of course, the limited period has become a bad joke.)

I should point out that under this strategy – the maximizing influence strategy – one would never sign away exclusive rights to one’s own work, because exclusive rights drastically limit the potential distribution channels, and the potential impact.

So, if anyone can make money from this posting, have at it!

The obvious problem is that recessions bring with them reductions in income – the stuff that state legislatures and student households use to support universities, and wealth – the stuff that constitutes university endowments. Much has been written recently about the terrific endowment growth that universities experienced during fiscal year 2007. Well, the stock market has been falling quite sharply for the last several months, and I’ll bet that the number of universities whose endowments grow appreciably in the current fiscal year will be fairly small. So, the sources of the money that we spend on collections and services are likely to be under stress in the next year or so, and libraries will get to share in some of the pain that our institutions will experience. (There is a longer discussion, that I will provide at some point, about the problems that arise when institutions that collect with an eye to the needs of users over years and decades have to deal with the vagaries of budgets that bounce around from year to year. Briefly, it would be good for both us and our universities to try to smooth out the effects of the business cycle, but that’s not easy to do.)

The less obvious problem has to do with the indirect effects that a recession will have on the behavior of publishers and media companies as they continue to press Congress for protection against all and sundry, most emphatically including libraries. Bill Patry has a number of nice discussions of the remarkably disingenuous rhetorical turn undertaken by publishers, the RIAA, and other representatives of copyright holders as they cloak simple greed in the language of the moral high ground.

Claims that copyright involves human rights or is a property right are based on the theory that copyright is also a natural right — a right that exists independent of legislative enactment, even if there are legislative enactments. In the United States, copyright is not a natural right, since the Supreme Court has said so twice, first in 1834 in Wheaton v. Peters, and then in 1932 in Fox Film Corp. v. Doyal. Yet, rhetoric based on a natural rights basis for copyright are behind all the claims that those who use copyrighted works without permission are thieves or pirates. If copyright is instead a limited privilege that parcels out limited control to copyright owners, one might view issues differently. [Patry Copyright Blog, Jan. 18, 2008]

What does this have to do with recessions? Well, one of the things that happens when times are tough is that those who are having tough times seek public relief. Quite appropriately, Congress and the President are now working on developing a stimulus package to aid the economy as a whole, and the Federal Reserve has just implemented a cut in interest rates designed to forestall a recession. But individual industries will also seek specialized relief, and will attribute their problems to causes for which they have favorite cures. The favorite cure for the media companies, of course, is ever-tighter intellectual property laws, with ever-greater limitation (or at least a climate of fear) around legitimate fair uses. Just watch, if a recession unfolds, as the media go back to Congress and ask for protection against the public and the libraries, even though the causes of their current problems are changes in technology to which they have adapted badly, as well as the recession itself.