Thoughts on Black Markets

by on May 30, 2007 · 22 comments

This site tracks the value of some “black market” goods from pirated movies to body parts and human trafficking. Missing: Murder for Hire, though Kidnapping is represented.

One ought to distinguish at least two types of markets represented here; a) those in which the goods being sold do indeed “belong” to the seller who wishes them to “belong” to the buyer. Markets for illegal drugs for example. “Belong” is in quotes because from a legal standpoint there are no “property rights,” rather, the rights are those that would exist at law just as with any other planted produce or chemical stew if it were not for regulatory bans. Then there is b) the rights in question have been wrested away unlawfully from a third person and appropriated by the seller, who then transfers them to the buyer. Human trafficking, for example, and piracy.


This distinction is important because it is tempting from a libertarian standpoint to immediately think about the ruinous War on Drugs when one sees any commentary on the value of pirated products. It is sometimes assumed that anywhere one sees an expensive enforcement regime that does not produce the desired results, that the underlying substantive law cannot be justified. But here details matter.

If the laws against murder and assault were enforced by, say, two-year-olds armed with gold-plated toothbrushes, enforcement would be expensive and ineffectual. Likewise, if we had the current enforcement regime, but people suddenly developed the ability to teleport. But this is not an argument against the laws against murder and assault. It is an argument for revisiting the enforcement regime. Arguably, the current situation with copyright is partly analogous; either there is no enforcement, or, the enforcement is unsuited to the Internet environment.

Note that I said “partly” analogous. Copyright law also entails commitments to enforce rules about what people may do with their own equipment–computers, for example. Are we then back to an analogy to the War on Drugs? Once, I found that convincing. Now I think given all the other ways in which many other rights (property, contract, tort) restrict what we may do with our equipment, on the principle that my rights stop where others begin, that it is too unsophisticated an account of what property rights will be in an advanced networked economy.

There’s another too-simple argument lurking here. Suppose we were to argue that the law of copyright is like the War on Drugs, because full enforcement of both would be intolerable. Full enforcement of the laws against murder would clearly be tolerable, even desireable. Full enforcement of the War on Drugs would put maybe 70 percent plus of the population in prison. What about the law on copyright? Analogous? Again, yes and no. But surely the argument is not done. First, the consequences of drug use fall substantially on the buyer or those near and dear to him and only indirectly on third parties, whereas the harm of piracy falls mainly on blameless third parties, the creators of the pirated product; the latter is much less a “victimless” crime. Second, the argument that full enforcement of copyright law would be intolerable seems to lose its moral force if the penalties were scaled back to civil damages. This is not clear in the case of the War on Drugs. For one thing, because there is no “injured” third party except arguably in the case of neglected children, there are no analogous civil damages to scale back too. If the penalties for drug use were simply small fines payable to the state? A sort of tax on drug use? Maybe.

My larger point: early on in my career, it appealed to my libertarian instincts to assume that there was trouble with a substantive legal regime any time I spotted it creating a black market. I now see that it is not so simple. Once one abandons the assumption that enforcement regimes are fixed, further discussion must follow at length, especially when the substantive rules support a market, as they do with copyright.

  • Doug Lay

    Any talk about full enforcement of copyright law is just academic unless you have an example of an enforcement regime that works. You don’t. DRM and the DMCA are laughable failures.

    Moreover, these failed attempts at enforcement do impose a cost on blameless third parties – consumers and technologists.

  • Doug Lay

    Any talk about full enforcement of copyright law is just academic unless you have an example of an enforcement regime that works. You don’t. DRM and the DMCA are laughable failures.

    Moreover, these failed attempts at enforcement do impose a cost on blameless third parties – consumers and technologists.

  • http://linuxworld.com/community/ Don Marti

    What about considering the proportion of the consequences of enforcement that falls on offenders, and how much falls on innocent people and taxpayers? The DMCA’s anticircumvention provisions are like protecting the integrity of hair-based drug tests by imposing a ban on haircuts.

    We have a “tax on drug use” for alcohol and tobacco.

  • http://linuxworld.com/community/ Don Marti

    What about considering the proportion of the consequences of enforcement that falls on offenders, and how much falls on innocent people and taxpayers? The DMCA’s anticircumvention provisions are like protecting the integrity of hair-based drug tests by imposing a ban on haircuts.

    We have a “tax on drug use” for alcohol and tobacco.

  • http://www2.blogger.com/profile/14380731108416527657 Steve R.

    Singleton’s approach is flawed.
    First, the post neglects to mention that the rights of a copyright owner are limited. This leaves the reader with the false impression that the copyright owner has “unlimited” authority to define how copyrighted material may be used.
    Second, the post neglects to mention that, by law, the consumer is entitled to certain privileges when using copyrighted material.
    Third, the post neglects to mention that the content providers are attempting to aggrandize (seizing) rights that they do not currently own at the expense of the consumer.
    Fourth, the post fails to discuss that content owners believe that they have a right to trespass onto a consumers property to “protect” protect their so-called intellectual property. For a lawyer concerned about “property rights” the omission of the content owners complying with due process seems particularly glaring and disingenuous. Is Singleton implying that that certain segments of society have an intrinsic superior property right than other segments and can seize, at will, the property of the less fortunate?

    Based on the post, it would appear that consumers have no rights. When a segment of society is trampled on things such as civil disobedience and black markets emerge. Singleton is correct in one sense, a copyright black market currently exists because there is “substantive legal regime” creating it.

  • http://www.pff.org Noel

    Steve R, you seem to assume that what is omitted above is argued against. In that case, can you list some issues around consumer rights that should always be addressed when talking about copyright policy and enforcement.

    Also, keep in mind that many digital goods are licensed, not bought in the sense that you *own* the goods. Many misconceptions of “consumer rights” arise from this distinction.

  • http://www2.blogger.com/profile/14380731108416527657 Steve R.

    Singleton’s approach is flawed.
    First, the post neglects to mention that the rights of a copyright owner are limited. This leaves the reader with the false impression that the copyright owner has “unlimited” authority to define how copyrighted material may be used.
    Second, the post neglects to mention that, by law, the consumer is entitled to certain privileges when using copyrighted material.
    Third, the post neglects to mention that the content providers are attempting to aggrandize (seizing) rights that they do not currently own at the expense of the consumer.
    Fourth, the post fails to discuss that content owners believe that they have a right to trespass onto a consumers property to “protect” protect their so-called intellectual property. For a lawyer concerned about “property rights” the omission of the content owners complying with due process seems particularly glaring and disingenuous. Is Singleton implying that that certain segments of society have an intrinsic superior property right than other segments and can seize, at will, the property of the less fortunate?

    Based on the post, it would appear that consumers have no rights. When a segment of society is trampled on things such as civil disobedience and black markets emerge. Singleton is correct in one sense, a copyright black market currently exists because there is “substantive legal regime” creating it.

  • http://www.pff.org Noel

    Steve R, you seem to assume that what is omitted above is argued against. In that case, can you list some issues around consumer rights that should always be addressed when talking about copyright policy and enforcement.

    Also, keep in mind that many digital goods are licensed, not bought in the sense that you *own* the goods. Many misconceptions of “consumer rights” arise from this distinction.

  • Anonymous

    >> Also, keep in mind that many digital goods are licensed, not bought in the sense that you *own* the goods. Many misconceptions of “consumer rights” arise from this distinction.

    Many consumers do indeed feel that they “own” digital goods that they have paid for. Perhaps the consumers are correct and it is the “licensor” who has a misconception.

  • Anonymous

    >> Also, keep in mind that many digital goods are licensed, not bought in the sense that you *own* the goods. Many misconceptions of “consumer rights” arise from this distinction.

    Many consumers do indeed feel that they “own” digital goods that they have paid for. Perhaps the consumers are correct and it is the “licensor” who has a misconception.

  • http://www.pff.org Noel Le

    Regardless of what consumers feel, you cant just go around downplaying piracy to hype up imaginary rights with no other basis than what you regard as a natural right to information.

  • http://www.pff.org Noel Le

    Regardless of what consumers feel, you cant just go around downplaying piracy to hype up imaginary rights with no other basis than what you regard as a natural right to information.

  • http://www2.blogger.com/profile/14380731108416527657 Steve R.

    No one is downplaying piracy. However, piracy is being used as a “red herring” by the content industry to justify the passage of onerous laws to eliminate consumer rights. It is the content industry that is hyping imaginary rights to abuse the consumer.

    Remember the Sony rootkit debacle were Sony effectively disabled a users CD drive so that it would not work in certain situations. This is a clear concrete example of the content industry believing that it has an imaginary unilateral right to seize control of property.

  • http://www2.blogger.com/profile/14380731108416527657 Steve R.

    No one is downplaying piracy. However, piracy is being used as a “red herring” by the content industry to justify the passage of onerous laws to eliminate consumer rights. It is the content industry that is hyping imaginary rights to abuse the consumer.

    Remember the Sony rootkit debacle were Sony effectively disabled a users CD drive so that it would not work in certain situations. This is a clear concrete example of the content industry believing that it has an imaginary unilateral right to seize control of property.

  • Doug Lay

    >> Regardless of what consumers feel, you cant just go around downplaying piracy to hype up imaginary rights with no other basis than what you regard as a natural right to information.

    Who gets to decide what rights are imaginary?

    Any argument that starts out “regardless of what consumers feel” is not an argument that is going to survive long in today’s marketplace. The consumer is king.

    Also, what do you mean by “you can’t just go around downplaying piracy…”? Do you believe in free speech or not?

  • Doug Lay

    >> Regardless of what consumers feel, you cant just go around downplaying piracy to hype up imaginary rights with no other basis than what you regard as a natural right to information.

    Who gets to decide what rights are imaginary?

    Any argument that starts out “regardless of what consumers feel” is not an argument that is going to survive long in today’s marketplace. The consumer is king.

    Also, what do you mean by “you can’t just go around downplaying piracy…”? Do you believe in free speech or not?

  • http://www2.blogger.com/profile/14380731108416527657 Steve R.

    Noel: On “imaginary rights” Techdirt provides us with a good example of a company extorting a so-called “right” out of thin air. Techdirt reports that MLB is claiming that the use of SlingMedia’s Slingbox by persons who have paid to watch content, but wish to watch it later (timeshift), is illegal. It seems logical that if you are unable to watch something that you paid for at the time it was available for viewing that “fair use” would allow you to record it for later viewing.

    Mike concludes: “And, the most ridiculous part is that Slingbox is a great tool for baseball fans helping them to get more enjoyment and more value of the game. Yet, MLB is upset because how dare anyone give fans more value without first paying MLB their share.”

  • http://www2.blogger.com/profile/14380731108416527657 Steve R.

    Noel: On “imaginary rights” Techdirt provides us with a good example of a company extorting a so-called “right” out of thin air. Techdirt reports that MLB is claiming that the use of SlingMedia’s Slingbox by persons who have paid to watch content, but wish to watch it later (timeshift), is illegal. It seems logical that if you are unable to watch something that you paid for at the time it was available for viewing that “fair use” would allow you to record it for later viewing.

    Mike concludes: “And, the most ridiculous part is that Slingbox is a great tool for baseball fans helping them to get more enjoyment and more value of the game. Yet, MLB is upset because how dare anyone give fans more value without first paying MLB their share.”

  • http://enigmafoundry.wordpress.com/ enigma_foundry

    Solveig makes a rather detailed study of one aspect, that is whether the balck market is prima facia evidence of something being amiss with a regulatory scheme.

    It may not always be. However it is very important to note that there are other dimensions to this problem, namely, every regulatory scheme normally entails some loss of freedom and also imposes some costs on society.

    The costs, in terms of lost innovation, are a matter of some debate. I believe the lost innovation costs to be too high, and Solveig and many others of the IPCentral tribe, do not.

    However, the lost innovation is not the only leg that the argument against DRM and DMCA stand on. In fact, in my accounting, that argument is not needed, because the affront to human freedom is so great that no argument in terms of efficiency and business plans can overcome the hurdle which any argument which proposes to eliminate substantial human freedom, that is the First Amendment, must reach.

  • http://enigmafoundry.wordpress.com eee_eff

    Solveig makes a rather detailed study of one aspect, that is whether the balck market is prima facia evidence of something being amiss with a regulatory scheme.

    It may not always be. However it is very important to note that there are other dimensions to this problem, namely, every regulatory scheme normally entails some loss of freedom and also imposes some costs on society.

    The costs, in terms of lost innovation, are a matter of some debate. I believe the lost innovation costs to be too high, and Solveig and many others of the IPCentral tribe, do not.

    However, the lost innovation is not the only leg that the argument against DRM and DMCA stand on. In fact, in my accounting, that argument is not needed, because the affront to human freedom is so great that no argument in terms of efficiency and business plans can overcome the hurdle which any argument which proposes to eliminate substantial human freedom, that is the First Amendment, must reach.

  • Henry Miller

    I have to take issue with your claim that use of illegal drugs only effects the customer and close friends. It affects me as well because in our current welfare state I have to pick up the bill for those who were once capable of holding a good job, but are no longer able to live on their own. If we didn’t have welfare, and there was no thought of socialized medicine I wouldn’t mind, but when your addiction can potentially cost me money I mind.

  • Henry Miller

    I have to take issue with your claim that use of illegal drugs only effects the customer and close friends. It affects me as well because in our current welfare state I have to pick up the bill for those who were once capable of holding a good job, but are no longer able to live on their own. If we didn’t have welfare, and there was no thought of socialized medicine I wouldn’t mind, but when your addiction can potentially cost me money I mind.

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