2. Some Basic Economics of Information Production and Innovation
Information is nonrivalrous (we can both use it at the same time). It is also circular in that it is both input and output to its own production -- building a table requires wood, writing a paper requires other papers. Copyright laws are justified as making information rivalrous and thus creating a market for it but are constrained so that later the result can be used in the circular production process. But how is producing information actually motivated?
Strategies of producers fall along two axes: benefit maximization (using excusive rights to make money, using nonexclusive rights to make money, using nonexclusive rights to get non-monetary benefits) and cost minimization (using public domain information, using purchased/owned information, and using privately shared information). This results in nine production strategies. Each strategy receives different inefficiencies from copyright law, so a law's effects depend on which strategies are used. But which strategies get used depends on the law.
Which strategies are used also depends on the technology. New technology has made nonmarket strategies more practical, but incumbent firms want to protect their own models by strengthening copyright laws.
Sources cited in the chapter
Other relevant readings
Standing-on-the-shoulders-of-giants Effect (37)
Input/Output Circularity (see Standing-on-the-shoulders-of-giants Effect)