I read this blurb over on Slashdot about a good article entitled "Does innovation require intellectual property rights?":

In a paper that has gained wide attention (and caught serious flak) for challenging the conventional wisdom, economists Michele Boldrin and David K. Levine answer the final question with a resounding yes. Copyrights, patents, and similar government-granted rights serve only to reinforce monopoly control, with its attendant damages of inefficiently high prices, low quantities, and stifled future innovation, they write in "Perfectly Competitive Innovation," a report published by the Federal Reserve Bank of Minneapolis. More to the point, they argue, economic theory shows that perfectly competitive markets are entirely capable of rewarding (and thereby stimulating) innovation, making copyrights and patents superfluous and wasteful.

The basic reason, they argue, comes down to time. As long as there is some short period of time in which the creator can recoup their costs, then perfect competition will increase the amount they can charge during that time to the first buyers, who the creation is likely to be worth more to, as they intend to copy and re-sell it.

It's an interesting read, and makes some amount of sense. What's funny, is that the arguments against it (at least the ones listed in the article) basically say that they should have done more analysis on what happens as you vary that amount of time, but they fail to comment that until this paper its been ignored completely. So that argument is just as viable against the status quo as against this paper.

Empirically, I think it makes sense too. Let's say that, hypothetically, you were to increase the amount of monopoly time granted to a creator to infinity. Assumedly, this entity is able to create due to either extraordinary skills or greater resources (such as money) that others do not have. By making this monopoly grant infinite, they have less incentive to risk more of those resources in the future for further creation. They now have a cash flow that they can sit on theoretically forever (yeah, I know about substitutes, and that all this is a vast oversimplification, but isn't all economics? :) )

If the monopoly protection, however, were to end sooner, then they need to keep investing those resources in further creation to find the next source of cash flow. This force would seem to move against the traditional argument of the protection working as incentive to create, meaning that depending on the slopes of the two lines, there's a nice curve here somewhere.

One of my long-standing thoughts about web business models, has been similar to that process. If a site (like, say, Goats) charges for all content, then there's no way to prove the quality of the site. But if we make it all free, we go out of business. Now, we have our subscription system which is one way around this, but unfortunately entails us making lots of new stuff for the subscribers, which keeps Jon busy. Another way to accomplish the same thing is just to time delay everything. That way we have archives for new readers, and free stuff for the search engines to index and create links based on, but we also have the most recent stuff as a pay only model. People who really like us can pay to see the strip a week sooner than those who don't think we're worth it.

This only works with time based content, and for Goats, the temporal relevance is probably not sufficiently important, but for news sites, analysis and opinion based blogs, and finance information, I think this makes some amount of sense. It also seems to fit right in with what this paper is saying...and I'm always happy if other people can do the work to back up my outlandish assumptions.