The Competitiveness of Nations in a Global Knowledge-Based Economy
The Economic Aspects of Copyright in Books
[1
(Ernest Cassel Professor of Commerce in the
Economica, New Series, 1
(2
May, 1934, 167-195
IF an economist needed encouragement or justification
for devoting time to the consideration of the effects of copyright legislation
on the output of literature, he might find it in the stimulating introduction
which Professor Frank H. Knight has contributed to the reissue of his Risk,
Uncertainty and Profit. “Having
started out by insisting on the necessity, for economics, of some kind of
relevance to social policy - unless economists are to make their living by
providing pure entertainment or teaching individuals to take advantage of each
other,” he discusses the conditions of relevance of economics to social policy,
and his “first and main suggestion” is that an “inquiry into motives might well,
like charity, begin at home, with a glance at the reasons why economists write
books and articles.” [2] Direct monetary profit from the sale of
what they write does not figure in Professor Knight’s suggestive discussion of
the motivation of economist-authors; although for three, if not four, centuries
the advocates of property in the right to copy have argued as though book
production were the conditioned response of authors, publishers and printers to
the impulse of copyright legislation. An inquiry into the rationale of
copyright seems therefore both worth while in itself and likely to prove of
general interest among students of economics.
There is, of course, a special difficulty in discussing
the subject of copyright, in that a writer has an unavoidable bias. How many of us approach the topic in the
spirit evinced by H. C. Carey in his Letters on International Copyright?
“The writer of these Letters
had no personal interest in the question
1. Presidential Address to the
2. London
School of Economics Series of Reprints, No. 16, pp.
xxv-xxvi.
167
therein discussed. Himself an author, he has since gladly
witnessed the translation and republication of his works in various countries of
Europe, his sole reason for writing them having been found in a desire for
strengthening the many against the few by whom the former have so long, to a
greater or less extent, been enslaved. To that end it is that he now writes,
fully believing that the right is on the side of the consumer of books,
and not with their producers, whether authors or publishers.” T. H. Farrer, at that time Permanent
Secretary to the Board of Trade, found it necessary to observe, when reviewing
the proceedings of the Royal Commission on Copyright in the Fortnightly
Review (December 1878), that authors, who were the principal witnesses, are
interested witnesses: “printed controversy is therefore, on the whole,
one-sided.” It is rather like
relying on articles in the daily newspapers for views on the waste involved in
Press advertising. Bias, and fear
of bias, make an author’s judgment on copyright a little unreliable. His readers must exercise particular
vigilance.
2 Book production without
copyright
A convenient approach to the whole subject is to try to
visualise the organisation of production of books, which we select as a typical
commodity for the purpose of this inquiry, in the absence of any sort of
copyright provisions. We may define
“the absence of copyright provisions” as the circumstances in which the buyer of
a literary product is free, if he so desires, to multiply copies of it for sale,
just as he may in the case of ordinary commodities. Would books be written in such
circumstances, and would they be published? Would firstly authors, and secondly
publishers, find it possible to make arrangements of a sufficiently remunerative
kind to induce them to continue in the business of book
production?
It should be observed at the outset that part of the
output of literature is written without thought of direct remuneration at all.
There are authors - scholars as
well as poets - who are prepared to pay good money to have their books
published.
1. H. C. Carey: Letters on International
Copyright (Preface to 2nd Edition.
168
It is conceivable that their output is in some cases
quite unaffected by demand conditions: so long as they can go on paying they
will go on writing and distributing their books. There is secondly an important group of
authors who desire simply free publication; they may welcome, but they certainly
do not live in expectation of, direct monetary reward. Some of the most valuable literature that
we possess has seen the light in this way. The writings of scientific and other
academic authors have always bulked large in this class. Economists are relatively fortunate in
serving a market which so frequently provides a margin above costs of
publication for the remuneration of the author; their colleagues in other
faculties are usually only too pleased to secure publicity for their
contributions to our literary heritage without financial subsidy from
themselves. Publications are, of
course, in varying degree essential for their careers, in professions other than
that of authorship. They seek
recognition of their claims as scholars; and published work they must have, even
at the cost of paying for it. Speak
to them on the subject of direct immediate return, and they reply in terms of
numbers of off-prints or “separates.” In just that way were authors quite
generally paid in this country in the sixteenth century: they sold their
manuscript outright to the publisher for perhaps at most one or two hundred
copies: on occasion a little money might also pass.
For such writers copyright has few charms. Like public speakers who hope for a good
Press, they welcome the spread of their ideas. Erasmus went to
4. The payment of authors without
copyright
What, however, of a third group of authors - the
professional scribes, who write for their living? Whether they sell their writings to
publishers, who buy them because they hope to sell copies, or whether they
publish them direct, their living depends on the direct proceeds from their
writing, and. in both cases their receipts depend on the number of copies sold.
Clearly, they - both author and
publisher - would gain directly from the restraint of all reprinting that
resulted in a. diminished sale of their own copies. If the purchase of a copy ceased to carry
with it the right to make further copies from it
169
for sale, the author and original publisher might
contrive to do much better for themselves, by the simple monopoly device of
restricting the number of copies offered on the market. They would do still better if they were
given the power to control also the supply of directly competing books, as early
publishers had in this country. It
goes without saying, of course, that that undoubted fact is not an adequate
reason why the general public should give them either degree of monopoly
power.
The belief has been widely held that professional
authorship depends for its continued existence upon this copyright monopoly; or
upon an alternative which is considered worse, viz, patronage. Even if that were true, it would still be
necessary to show beyond reasonable doubt that professional authors were worth
retaining at such a price as copyright. The output which monopoly alone can evoke
is not normally regarded as preferable to the alternative products which free
competition would allow to emerge. Patronage itself may not be wholly an
evil. There seems to be no reason
why a person who wants certain things written and published should not be at
liberty to offer payment to suitable people to do the necessary work. If the task is uncongenial, some authors
will need high remuneration, and others will no doubt decline any terms; but
many a builder has been willing in the past to erect even monstrous dwellings
for rich men who had their own ideas about architecture. Patronage has in the past provided us
with some magnificent literature, music, pictures, buildings, and furniture.
There have been patrons who have
given artists a very free hand in their work. Civil servants, secretaries of
commissions, lawyers and others have conceived it their normal duty to express
in imperishable language the views of their employers, with whom they may
personally have been in disagreement. To Macaulay, nevertheless, speaking in
the House of Commons at the second reading of Serjeant Talfourd’s. Copyright
Bill in 1841 (February 5th , Hansard, Vol. LVI), patronage was
the only alternative to copyright; and it was so objectionable that it justified
copyright. “I can conceive no
system more fatal to the integrity and independence of literary men, than one
under which they should be taught to look for their daily bread to the favour of
ministers and nobles.” ... “It is desirable that we should have a supply of good
books; we cannot have such a supply unless men of letters are liberally
remunerated, and the least
170
objectionable way of remunerating them is by means of
copyright.” ... “The system of copyright has great advantages, and great
disadvantages.” ... “ Copyright is monopoly, and produces all the effects which
the general voice of mankind attributes to monopoly.” ... “ Monopoly is an
evil.” ... “For the sake of the good we must submit to the evil; but the evil
ought not to last a day longer than is necessary for the purpose of securing the
good.” ... “The principle of copyright is this. It is a tax on readers for the purpose of
giving a bounty to writers. The tax
is an exceedingly bad one; it is a tax on one of the most innocent and most
salutary of human pleasures; and never let us forget that a tax on innocent
pleasures is a premium on vicious pleasures.” But Macaulay nevertheless preferred
copyright to patronage.
Is there no other alternative, in the absence of
copyright? For the moment it will
be sufficient to remark that professional writers have contrived in the
past to secure a price for their product, in such circumstances, provided always
that a market exists for it at all. And it must be borne in mind that
copyright in a particular work cannot itself create a demand for the kind
of satisfaction which that work and similar works may give, it can only make it
possible to monopolise such demand as already exists. Ultimately there must be patrons among
the public, whom the author must serve if he is to sell his product. In the early days, authors were sometimes
curiously employed. Italian
paper-makers in the fifteenth century integrated forward, and organised staffs
of writers to work on their paper, in the hope of thereby making the market for
their product more secure. 1 We are reminded of the present-day
integrations of paper manufacturers and newspapers employing journalists. In the days of manuscripts there was
never, so far as we know, any thought of author’s copyright. Manuscripts were sold outright, the
author knowing that the buyer might have copies made for sale; and the first
buyer knew that every copy he sold was a potential source of additional
competing copies. In selling
copies, he would therefore exploit with all his skill the advantage he possessed
in the initial time-lag in making competing copies. Moreover, copies of copies naturally
fetched lower prices, for errors in transcription are cumulative; and the owners
of original manuscripts could sell, first-hand copies at special prices. They therefore received a more permanent
margin from which authors could be paid. It was
1. See Putnam: Books and Their
Makers.
all very like the present-day trade in new fashion
creations - the leading twenty firms in the haute couture of Paris take
elaborate precautions twice each year to prevent piracy; but most respectable
“houses” throughout the world are quick in the market with their copies (not all
made from a purchased original), and “Berwick Street” follows hot on their heels
with copies a stage farther removed. And yet the
Was this all altered by the invention of printing? In fact, the making of copies was
regulated almost at once; but we know beyond any doubt that the reason was not
to ensure that authors were better remunerated. The early history of book production in
this country is most illuminating on this whole question, and it will be touched
upon in a moment. For the present,
it will suffice to observe that four centuries after the days of Caxton, many
English authors were regularly receiving payment from publishers in a country
which had no copyright law for foreign books. During the nineteenth century anyone was
free in the
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authors, for “handsome sums” in fact to be paid. In the first place, there was the
advantage, well worth paying for, which a publisher secured by being first in
the field with a new book. To
secure priority American publishers regularly paid lump sums to English authors
for “advance sheets.” Secondly,
there was a “tacit understanding among the larger publishers in
1. E.g. Evidence of G. H.
Putnam.
2. Evidence, Professor John Tyndall, Question
5795.
3. E.g. Evidence of G. H. Putnam.
4. Evidence, Professor T. H. Huxley, Question
5610.
5. E.g. Evidence of T. H. Huxley, Question 5610. “I myself am paid upon books which
are published there: my American publisher remits me a certain percentage
upon the selling price of the books there, and that without any copyright which
can protect him.” Also John
Tyndall, Question 5775: “…I make an arrangement with my publishers ... in
Cf. also Herbert Spencer in a letter to The Times,
September 21st, 1895, reprinted in Various Fragments (1900):
“For a period of thirty years, during which English [works had no copyright in America, arrangements
initiated about iS6o gave to English authors who published with Messrs. —
profits comparable to, if not identical with, those of American
authors.”]
HHC: [bracketed] displayed on page 174 of
original
173
The significance of priority in the market, coupled with
a suitable size of edition and a corresponding price policy, as a deterrent to
competition is emphasised by an illustration. In an appendix to his book on The
Marketing of Literary Property, published in 1933, Mr. G. H. Thring
gives a number of accounts of the costs of book production. Taking his figures for a crown octavo
volume of 288 pages, eleven point, twenty-nine lines per page, an edition of
1,500 copies would involve approximately ₤300 to cover all publishing costs,
pay 10 per cent to the author and leave a profit of 16 2/3 per cent to the
publisher on all the costs, including royalty. That would mean an average wholesale
price of 4s. per copy, and a retail price of say, 6s. If the book were a success, and there
were no copyright law, a rival publisher might very probably come into the
market with a larger and therefore cheaper edition which would deprive the
author and first publisher of at least part of their anticipated receipts. They might, of course, lower the price as
soon as success showed itself to them, and reprint at once on a larger scale,
before competitors could formulate plans. A publisher who was more skilful in
judging public taste might, however, have embarked in the first instance on an
edition of, say, 3,000 copies, and if he calculated on receiving the same total
amount of profit himself from the venture and on paying twice the previous total
royalty to the author, the total sum involved might be about ₤382, or 2s. 9d.
per copy wholesale, corresponding to (say) 4s. retail. 1 A price as low as that would surely make
competitors hesitate before issuing,
1. The relevant detail of the costs, based on
figures of Mr. Thring, is:
174
late in the day, the still much larger rival edition
which would be necessary to make possible an appreciable further cut in
price. If a competing edition were
issued much more cheaply on poorer-quality paper and possibly unbound, it would
more probably tap a new market than divert the old. The abolition of copyright need not
therefore result in the complete abandonment of the business of book production
either by publishers or by professional authors.
5. The
early days of copyright
Our speculations will be made more fruitful if we pause
to inquire for a few moments into the nature and effects of copyright
regulations in this country.
The earliest records are hardly less enlightening than
those of our own generation. Regulation began in Tudor times with the
usual system of royal patents, conferring upon certain persons the monopoly of
the right to print particular books or classes of books. The patent system was of course applied
by a series of impecunious monarchs to all sorts of enterprise, but printing was
a special case, in due time expressly exempted (together with the manufacture of
armaments) from the Statute of Monopolies (21 James I, c. 3) of 1623. The printers did not fail to turn to
their own advantage the determination of the Crown to control the output of the
printing press. Many of the early
patent grants were, in their prime, profitable monopolies; one, for example,
comprehending all grammars in the Latin tongue, another the Bible, a third
covering all dictionaries, a fourth all books on law, and so on. A specialist writer, confronted by a
buyer’s monopoly for his class of work, had little hope of early publication,
still less of a profitable sale of his manuscript, if the monopolist had on his
hands a large stock of a competing book already printed. After 1557, when the general control of
the industry was entrusted to the Stationers’ Company, 1 a
comprehensive attempt was made at rationalisation in the interest of its
members. Each printer’s rights to
print were registered by the Company, and rights were assignable by one member
to another. Whenever exceptional
profits attracted interlopers, the case against unregulated competition was
argued by the
1. On the Stationers’ Company see A Transcript of the
registers of the Company of Stationers of
175
Company with a skill which our present-day trade
associations hardly excel. Already
in 1583 the report of Christopher Barker went to show that the patent
monopolies were not what they had been.
For instance, the “most profitable copy” in the country, a Latin grammar
for children, carried fixed charges which left the printers little more than
prime costs; “the printer with some greater charge at the first for furniture of
letters, hath the most part of it always ready set: otherwise it would not yield
the annuity which is paid therefor.” Monopolies cut into each other: Barker
himself had the patent for the Book of Common Prayer, but Master Seres had one
for a psalter comprising the most-used parts – “where I sell one book of common
prayer, which few or none do buy except the minister, he furnisheth ye whole
parishes throughout the realm, which are commonly a hundred for one.” Master Seres skimmed the cream. The industry already suffered from
serious surplus capacity: “there are 22 printing houses in
The era of the Star Chamber’s decrees and censorship was
a happy time for the members of the Stationers’ Company. Compared therewith,
confusion reigned as soon as the backing of the Star Chamber was removed by the
Long Parliament in 1641, and the Company’s petition of 1643 to Parliament
for greater powers of regulation 1 was
cunningly designed to make the flesh of an uncertain authority creep. “Too great multitudes of presses” set up
by “Drapers, Carmen and others,” were alleged to be in work, indiscriminately
printing “odious opprobrious pamphlets of incendiaries,” The ear of government
thus attuned, the petition proceeds to business. Even members of the Company were ignoring
property in copies, and if one complain he “shall be sure to have his copy
reprinted out of spite.” The
copyright monopoly is “a necessary right to stationers; without which they
cannot at all subsist.” ... “Property in copies is a thing many
ways
1. See Edward Arber, op cit., Vol.
1.
176
beneficial to the State, and different in nature from
the engrossing, or monopolising some other commodities into the hands [of] a
few, to the producing of scarcity and dearth, amongst the generality.” The stationers then pass to a statement
of the case for copyright which would not discredit an “economic adviser” to a
modern publishers’ association. The
first consideration is that books are luxuries, the demand for which is elastic,
and therefore monopoly cannot harm the public.
Books (except the sacred Bible) are not of such general
use and necessity, as some staple commodities are, which feed and clothe us, nor
are they so perishable, or require change in keeping, some of them being once
bought, remain to children’s children, and many of them are rarities only and
useful only to a very few, and of no necessity to any, few men bestow more in
Books than what they can spare out of their superfluities... And therefore
property in Books maintained among stationers cannot have the same effect, in
order to the public, as it has in other Commodities of more public use and
necessity.
The second consideration is that copyright monopoly
would result in more and cheaper books.
A well-regulated property of copies amongst stationers,
makes printing flourish, and books more plentiful and cheap; whereas Community
(though it seems not so, at first, to such as look less seriously, and
intentively upon it) brings in confusion, and many other disorders both to the
damage of the State and the Company of Stationers also; and this will many ways
be evidenced.
Their reasons recall the oscillation theory of modern
specialists in the mysteries of perfect competition. Over-production would result from an
absence of copyright:
For first, if it be lawful for all men to print all
copies, at the same time several men will either enviously or ignorantly print
the same thing, and so perhaps undo one another, and bring in a great waste of
the commodities…
and under-production also:
Secondly, the fear of this confusion will hinder many
men from printing at all, to the great obstruction of learning, and suppression
of many excellent and worthy pieces.
Booksellers’ risks and costs would
increase:
Thirdly, Confusion or Community of Copies destroys that
Commerce amongst stationers, whereby by way of Barter and Exchange they furnish
books without money one to another, and are enabled thereby to print with less
hazard, and to sell to other men for less profit.
177
Even professional authors come in for
consideration:
Fourthly, Community as it discourages stationers, so it
is a great discouragement to the authors of books also; many men’s
studies carry no other profit or recompense with them, but the benefit of their
copies; and if this be taken away, many pieces of great worth and excellence
will be strangled in the womb, or never conceived at all for the
future.
Copyright should pass to heirs and assigns without
term:
Fifthly... many families have now their livelihoods by
assignment of copies ... and there is no reason apparent why the production of
the brain should not be as assignable ... as the right of any goods or chattels
whatsoever.
And finally, in view of the
foregoing:
‘Tis obvious to all, that (if we will establish a just
regulation) foreign books must be subjected to examination, as well as our own,
and that all such importation of foreign books ought to be restrained as tends
to the disadvantage of our native stationers.
The case for copyright has rarely been stated as
comprehensively as in this early petition. Parliament responded promptly with the
requisite Ordinance of 1643 (virtually a re-enactment of an old Star Chamber
decree), to which we owe at least the inspiration of John Milton’s
Areopagitica of the following year. Under the Commonwealth, political
censorship was continued, and after the Restoration the office of Licenser was
revived by an Act of 1662 (13 and 14 Car. II, C. 33) which was
little more than a new version of the former ordinances. The Act expired in 1679, was renewed in
1685, continued again till 1692, and then re-enacted for two more years. It lapsed finally in 1694. Until then, the control of the
Stationers’ Company continued over all copyright, which had to be registered in
its books; but thereafter its authority to restrain reprinting
ceased.
6. Competition, and the first Copyright
Statute
As we have seen, authors could expect little benefit to
themselves from the patent system. The printer who enjoyed the patent right
for a particular class of book had a buying monopoly for all manuscript books in
that class, and authors were in his hands. Under the control of the Stationers’
Company, as members began to compete among themselves for the right to issue new
books, authors were gradually enabled to bargain with more success. In the seventeenth
178
century some of them were in a position to sell the
rights to publish only one edition of a stated number of copies; and cash
payments, in addition to the delivery of the authors’ copies, became more
general. The bulk of the publishing
business came into the hands of the
7. The “perpetual copyright”
question
In view of the claims which the Stationers’ Company had
hitherto made, the terms of the Copyright Act of 1709-10 are significant.
In the case of existing books, the
Act gave the authors, or if they had transferred their rights (which, of course,
they almost invariably had) the then proprietors, the sole right of printing
them for twenty-one years and no longer. In the case of new books, the author was
given the sole right of printing them for fourteen years from the date of
publication, and, if then still living, for one further term of fourteen years.
The penalty for pirating was
forfeiture and a fine of one penny per sheet, the protection extending only to
books registered at the Stationers’ Company. It will be noticed how closely the Act
followed the patent system for inventions, as preserved in the Statute of
Monopolies of 1623. The London
booksellers, who must by then have despaired of ever securing the perpetual
copyright which at one time they had claimed, had no reason to oppose the grant,
enforceable in the Courts, of
180
fourteen years of monopoly power for every new book they
bought outright, although some of them subsequently protested when they realised
that the second period of fourteen years granted to authors who were still
living was the author’s property to sell again. [1]
Authors themselves were placed in a much better
bargaining position. Their success
depended upon individual popularity and reputation. As regards “bargaining power,” they
needed only to avoid committing themselves far ahead in any one contract, for if
their books sold well they could rely on booksellers to bid up each other. The career of David Hume as an author
well illustrates the position. [2] In 1739 at the age of twenty-eight he
sold the rights to the first edition in two volumes of his first book, A
Treatise of Human Nature, 1,000 copies to be printed, to John Noon,
bookseller, for fifty guineas and twelve bound copies. A year later, the third volume, A
Discourse Concerning Morals, was ready, and although
1. For an entertaining and informative account of
this period see Augustine Birrell: Seven Lectures on the Law and History of
Copyright in Books. (Cassell, 1899.)
2. See The Letters of David Hume, edited by
J. Y. T. Greig.
3. Letter,
And again, letter,
180
“from the beginning to the accession of Henry VII,” for
₤1,400, “the first previous agreement ever I made with a
bookseller.” Millar apparently also
bought the “full property” in the first two volumes of the History for
another eight hundred guineas. Nevertheless, David Hume had reason to
protest frequently against the sharp practices of Andrew Millar, who deceived
him continually concerning the size of editions and their rate of sale, and
reprinted an edition without giving the author the agreed opportunity to correct
the text.
Andrew Millar took a leading part in the renewed attempt
which the
1. The three famous cases of Tonson v. Collins,
1760; Millar v.
181
eleven for Becket. [1] “Thus for ever,” says Birrell,
“perished perpetual copyright in this realm.” The
This rapid survey of the early history of copyright in
this country will have served its purpose if it makes more clear the interests
concerned in the important changes introduced into the law by the Act of 1842 (5
and 6 Vic., c. 45), which remained in force right through the remainder of the
nineteenth century and was only superseded by the present Copyright Act of 1911.
The Copyright Act of 1842 had the
effect in general of adding another fourteen years to the monopoly period. Copyright was made to extend for the life
of the author plus seven years, or forty-two years from the date of publication,
whichever period was the greater. There may be doubt whether the volume of
authorship was thereby increased, but it certainly increased the profits to be
made from the sale of successful books. The immediate occasion for the passing of
this important measure is of interest; if the evidence of a publisher of the
time is to be accepted, [2] the Bill
found favour in the House of Commons “because it was understood to be for the
special benefit of the family of Sir Walter Scott, whose copyright was about to
expire under the old law.” More
specific and less far-reaching means of achieving that particular end might well
have been devised.
1. It is of interest to note that David Hume at
once wrote to Wm. Strahan, the successor to Millar’s business, suggesting the
transference afresh to him of Hume’s property in his most recent alterations to
his works. “If nobody can reprint
these passages during fourteen years after the first publication, it would
effectually secure you so long from any pirated edition.” (Letter,
2. Cf. Evidence of John Henry Parker, a retired
publisher, before the Royal Commission on Copyright of
1876-8.
182
For seventy years the Copyright Act of 1842
exercised a far-reaching influence on the output and prices of English books
in the
The defence of high prices in
1. Cf. Evidence of R. A. Macfie, before the same
Commission, and see also A.-C. Renouard: Traite des Droits d’Auteurs,
2. Edinburgh Review, October 1878; article on the
Report and Evidence of the Royal Commission on Copyright. Cf. also The Humble Remonstrance of the
Company of Stationers,
183
device for securing in this way the diversion of scarce
resources to particular uses. It is
involved in the patent system for inventions, in the chartered-company method of
opening up “new” territories, in the “public utility corporation” for the
provision of services, and so on. What is generally overlooked by the more
enthusiastic advocates of these schemes is the alternative output which the
resources would have yielded in other employment. T. H. Farrer, giving evidence before the
1876-8 Commission, no doubt had these considerations more or less clearly in his
mind when discussing the weaknesses of copyright. “What we want, I believe, is more good
books and cheaper good books; but we do not want more books; we have too many
books at present. Some persons,
whose opinions are deserving of much consideration, wish to do away with
copyright in order to diminish the number of books, and to reduce the number of
those who make authorship a trade. They think that to do so would be a gain
to the public in providing better books, and that it would not discourage those
who write for the sake of reputation or for the sake of truth, and less for the
sake of money. I do not say that I
agree with these persons, but I think they are right in thinking that we have,
under the present system, too many books.” [1
The fact is, of course, that the eminent publishers who
have called attention to the inevitable element of risk in the conduct of their
affairs have been prone to exaggerate the unreliability of their judgment in
selecting manuscripts for publication at their own risk. Suppose it to be true that four books out
of five fail to pay: are they all - were they ever all - issued at the
risk of the publisher? Faced with
really risky propositions, do they not suggest to the luckless author that he
should share the risk with them, or bear the whole costs, or secure a subsidy
from elsewhere? Would it indeed be
sound business for a publisher to subsidise definitely hazardous enterprises out
of the monopoly profits gained through copyright? Insurance companies select the risks they
bear, and publishers do likewise, notwithstanding the fact that the funds
they risk arise in part from monopoly profits. Where guess-work is a fair description of
the publishing business, copyright no doubt increases the amount of risk-bearing
by lengthening the odds receivable on the winners. It fails, however, to describe a great
part of the book-publishing trade. The fortunes of
1. Evidence of T. H. Farrer, the Secrtary to the Board of
Trade,
184
publishers vary enormously, but the differences are not
by any means attributable to luck alone. The authors who (it is of interest to
observe) were included on the 1876-8 Royal Commission had had experience with
publishers of widely varying success. To Dr. Wm. Smith, for instance, “only one
book in four is a very moderate calculation of the books which are successful,
of the books which pay their expenses.” Anthony Trollope on the other hand had
“learned from two publishers within a short period that not one book in nine has
paid its expenses, and that still they have been able to carry on the trade.”
The comment of the Secretary to the
Board of Trade was that “the public and the successful author must have to pay
handsomely for the publishers’ unsuccessful speculations.” [1] To the extent that
publishers are successful in selecting books which sell, for issue at their own
risk, and in requiring the authors to finance the publication of the remainder,
copyright legislation does not have the effect of inducing them to undertake
more risk-bearing. If the intention
be to secure the publication of books for which in a free market authors would
have to pay, more certain methods of achieving that end could certainly be
devised. And if it could be assumed
that there are public reasons for subsidising the production of such books,
students of public finance will probably agree that more equitable means could
be found of distributing the cost. It is not, however, to be expected that
many people would support
the principle of indiscriminate encouragement of all books which publishers
regard as unlikely to sell in sufficient volume to cover their cost. And this is precisely the result which
copyright may secure.
10.
The fixing of prices: author v.
publisher
It may be useful at this stage to set out the interests
of authors and publishers respectively in the prices to be charged for books
under copyright monopoly. It is not
to be supposed that both parties are necessarily best served by a price which
restricts the supply of a book to the point of maximum net profit to the
publisher. The author’s interest
will depend rather on the terms of his contract with the publisher, and
generally he will be better served by a larger edition and lower selling price
than will pay the publisher best. Where the publisher is the entrepreneur,
he is concerned to maximise the surplus of aggregate receipts over aggregate
costs. The
1.Evidence,
185
author on the other hand, if paid a fixed sum per copy
or a percentage of the published price, has no concern with costs. If paid a fixed sum per copy, the
author’s receipts will be greater, the lower the final price and the greater the
number of copies sold; if he receives a percentage of the published price, his
receipts will be greatest when the gross receipts from sales are
maximised, not (like the publisher) when net receipts after deduction of
costs are greatest. Since every
additional copy printed adds something to the aggregate costs of an
edition, net receipts and the publisher’s profit are maximised at a
smaller output and higher price than would result in the greatest gross
receipts and author’s income. The divergence of interest is shown
clearly in a diagram exhibiting aggregate receipt and cost
curves.
The author is therefore usually interested in securing a
price and output nearer to the competitive figures than those which pay the
publisher best. Only when the
author becomes a joint entrepreneur, and shares the net profits with the
publisher after the deduction of costs, do their interests in monopoly
restriction coincide; and only in the case in which the author takes the whole
risk and pays the publisher a commission based on costs or gross receipts is the
author concerned to issue a smaller edition at a higher price than the publisher
would wish for.
11.
Price discrimination at home and
abroad
In the nineteenth century the extremely high prices
which English publishers exacted for books, behind the copyright law, led to the
emergence of the circulating libraries, which became in due course a powerful
vested interest standing in the way of a lower-price policy. As the most
important
187
buyers of new books, particularly novels and biography,
and dependent upon high book prices for public support, the circulating
libraries attained to a position in which they could insist upon the publishers
maintaining high prices to the public for a term of years while supplying the
libraries at less than wholesale rates. [1] By issuing first an expensive and later a
cheaper edition, the publishers practised a very profitable form of price
discrimination in the home market; but the libraries enforced a longer delay
than some of them desired.
A discriminating price policy for the overseas markets
has long been a regular feature of the publishing trade. Circulating libraries may pay less than
booksellers for their supplies, but “colonial editions “ usually sell at still
lower prices. In the nineteenth
century the reasons were diverse: the colonial communities were poorer, less
interested in books and more cheaply supplied from other countries, particularly
the
12.
The “compulsory licence” or “royalty”
proposal
In such circumstances it is not surprising that
increasing attention came to be paid to proposals for encouraging competition
between English publishers by the introduction of the compulsory licence or
“royalty” system. As has been said,
the Keeper of Printed Books at the
1. See evidence to the 1876-8 Commission, e.g. George
Routledge: “... In the case of
novels published for the circulating libraries, you must give the trade a
certain time [before lowering the price], or else they will not take them.”
Sir Charles E. Trevelyan: “… No
doubt if the monopoly were abolished the circulating libraries would
collapse.”
187
assigns. Thereby the supply of successful books,
and quite possibly the remuneration of authors, would be increased. In
1. Evidence of T. H. Farrer on January 3 1st, 1877: “It is, however, at the present
moment in this country, scarcely a practical question… Whatever advantages a
system of royalty might have, it would require new machinery of an elaborate
kind, and it would disturb existing arrangements, and be opposed by existing
interests. It is, therefore, not
worth while now to discuss it, nor am I prepared to meet the various
difficulties of detail which would no doubt arise in considering it. To do so would require a far greater
knowledge of the practice of the trade than an outsider can pretend to. But judging from the little I have been
able to gather I should not think them insuperable.”
188
of the Commission as “of the graver class which do not
appeal to the popular tastes.” Students of philosophy were fair game for
monopolistic authors.
13.The Copyright Act of 1911:
the
introduction of the “royalty” system
These considerations, therefore, were responsible in
1878 for the decision of the
Commission that “it is not expedient to substitute a right to a royalty defined
by statute, or any other right of a similar kind” for copyright as it then
existed. It is consequently of
particular interest to observe that thirty years later it was largely due to the
pressure of a group of publishers, in another field, for the adoption of
the royalty or compulsory licence system that the present amending and codifying
Copyright Act of 1911
(1 and 2 Geo. V, ch. 46) was framed and passed. The publications in question were
mechanical reproductions of musical compositions. In 1908 a revised International
Copyright Convention was signed in
189
insisting on their right “to control the mode in which
their pieces are produced and the character of the instrument which produces
them.” The Committee with one
dissentient reported in favour of the thirteenth article and the composers, and
against the compulsory licence system. Nevertheless, the 1911 Copyright Act (Section
19) made provision for
compulsory licences for “records, perforated rolls, or other contrivances by
means of which … [musical works] may be mechanically
performed.”
The method adopted in this country for remunerating the
composer differs from that in the United States, where a fixed specific royalty
of two cents was made payable on each gramophone record. The gramophone companies favoured the
American system, and in their evidence before the departmental committee they
opposed a royalty system based on a percentage of the selling price of the
record, on the ground that a composer would then be “paid for the value put into
it by the interpretation of the great artiste.” There was further the problem of deciding
one rate of remuneration for all composers. Both difficulties had been anticipated in
1838 by A.-C. Renouard. [1] The basis adopted in the Act was, after
the first two years of its operation, 5 per cent, royalty on the retail selling
price of the contrivance, with a minimum of one half-penny for each separate
musical work in which copyright subsists. The Board of Trade is empowered, after
public inquiry, to vary the rate by provisional order, at minimum intervals of
fourteen years; and the administration of the system is controlled by the Board
by regulation, apparently without insuperable difficulty.
The Act of 1911 again increased the
duration of copyright in general, but in the same clause a most important
innovation was inserted, at last introducing the royalty system into book
publishing for the last twenty-five years of the copyright period. During that time, any person may
reproduce a published work,
1. See his Traité des Droits d’Auteurs, Volume I,
§IX, p. 463. Of the royalty system,
he wrote “Ce qui le rend inadmissible, c’est l’impossibilité d’une fixation
régulière, et l’excessive difficulté de la perception. Peut-être, a force de soins,
surmonterait-on les obstacles a
la perception; mais, quant a la fixation de la redevance,
le réglement en est impossible… Demandera-t-on a la loi de determiner une
redevance fixe? mais quoi de plus injuste qu’une mesure fixe, rendue commune
a des objets
essentiellement inégaux? … Si votre redevance a pour base une
valeur proportionnelle, chaque Télémaque de deux cents francs produira, pour le
seul droit de copie, plus que ne vaudra, dans l’autre edition [a vingt sous], chaque
exemplaire tout fabriqué; et cependant ce sera toujours le même texte qui n’aura
pas plus de valeur intrinséque dans un
cas que dans l’autre.”
190
after giving written notice and on paying royalties of
10 per cent, of the published
price to the owner of the copyright on all copies sold. No great difficulty seems to have arisen
in administering this clause. The
increase in the term of copyright, in accordance with the Berlin convention, to
the life of the author and a further period of fifty years is hardly likely to have
affected the terms of original publishing contracts and the output of authors’
manuscripts; but the new royalty system now makes it possible for at any rate
the second generation of readers after the death of an author to enjoy a wider
circulation of his books at lower prices, in spite of the increase in the
copyright period.
14.
Some
conclusions concerning the necessity for copyright
The conclusions concerning the necessity for copyright
which emerge from this survey may now be summarised. The parallelism with the case of patents
for inventions is of course very marked. In the first place, expectation of direct
reward explains only a part of the total output of literature, just as it fails
to account for more than part of the inventions which are made. Secondly, just as professional inventors
continue to be paid for their services in fields in which the patent system does
not apply, so also have professional authors in modern times been remunerated
for their writings, whether by payment of a lump sum or by way of royalty on the
sale of copies, in a country in which they were unprotected by copyright law.
The publishers of new books are
simply a special case of the manufacturers who exploit new but non-patentable
inventions for which they pay the inventor. (Where no payments have to be made to
authors, and the demand for the book is not in serious doubt, publishers are not
of course deterred by fear of competition from issuing an edition. Of that fact the abundance of
contemporary editions of standard works selling successfully against each other
at different prices and in a variety of formats, affords a continual
demonstration.) Thirdly, copyright
monopoly, like patent monopoly, enables the privileged producers to increase
their receipts from successful products by restricting the supply, and in so far
as experience and special skill are unavailing when a publisher tries to gauge
the relative chances of success of certain kinds of manuscript books, copyright
will, as we have seen, lead to an increased volume of risk-bearing. This consideration applies,
however,
191
over a definitely limited range of books; and it is
extremely doubtful on reflection whether there exist any public reasons for the
indiscriminate encouragement of the literature that falls into this
category. Nor is there any reason
why the increased volume of risk-bearing which copyright may elicit from certain
publishers should materialise in the form of books alone: a prudent business man
might well spread the risk more widely to include some racing or a gamble at
Lloyd’s with his book publishing. The odds might be still more attractive.
It is at least doubtful whether
book-buyers and successful authors should be specially selected, by the effects
of copyright on the price of the books which sell, to provide the fund which
increases the element of gambling inherent in the book-publishing
business.
More authors write books because copyright exists, and a
greater variety of books is published; but there are fewer copies of the books
which people want to read. Whether
successful authors write more books than they otherwise would is a question of
“the elasticity of their demand for income in terms of effort” - they may prefer
now to take more holidays or retire earlier. Some of them are in any case well advised
to write different books - instead of writing what they would otherwise want to
say or have to say, they find it more remunerative to write the sort of thing
for which the demand conditions are most appropriate for ensuring the maximum
monopoly profit.
The expectation of higher profits from book publishing
as the result of copyright tends to increase the number of publishers in the
business. Keen competition between
publishers will enable the authors, whose copyright monopoly they are anxious to
share, to make better bargains; with the result that the remuneration of
publishers will tend to fall to the market rate of return on their capital and
skill in other fields. Apart,
however, from the increased volume of unpleasant “remainders,” the prices of
books will remain above the competitive level so long as copyright
subsists.
There is, of course, no system of economic calculus
which supports the contention that output of the type which monopoly induces is
“preferable” to that which emerges from the different disposition of the same
scarce productive resources resulting from the competitive bidding of the open
market. One special weakness of
copyright monopoly as an administrative device is the non-discriminatory
nature of the encourage-
192
ment it affords to ventures which are too risky to be
embarked upon in a free market. It
is not difficult to imagine particular cases in which literary effort might well
be specially encouraged on public grounds. Large undertakings involving many expert
contributors and expensive illustrations might not invariably find sufficient
backers and “advance subscribers,” in view of the large capital outlay to be
made by the first publishers, to make them commercial propositions. Yet if there were public reasons for
financing particular ventures of this sort, subsidies provided from general
taxation have more to commend them than a copyright monopoly; and if that system
were politically impossible, it would surely be better that copyright monopoly
be limited to such enterprises, by some such system as that in which the
Comptroller of Patents is at present authorised to grant exclusive
licences to manufacturers to exploit inventions which” cannot be … worked
without the expenditure of capital for the raising of which it will be necessary
to rely on the patent monopoly” (Patents and Designs Act, 1907, as amended, Section 27
(s), (c)). It is, however, a far cry from hard cases
of this sort to a comprehensive system of copyright for all new books.
To the economist who studies the
statements of the case for and against the copyright system as we know it, there
is no document more satisfying in its logic than the minority report in which
Sir Louis Mallet, a member of the Royal Commission on Copyright of 1876-8,
stated the arguments against the continuance of the monopoly. His conclusion was that in the absence of
copyright “it will always be in the power of the first publisher of a work so to
control the value, by a skilful adaptation of the supply to the demand, as to
avoid the risk of ruinous competition, and secure ample remuneration both to the
author and himself.” [1
1. The uniformly high quality of reasoning in Sir Louis
Mallet’s minority report can be appreciated only if it is read as a whole, but a
small extract may perhaps be quoted with advantage:
“… Property exists in order to provide against the evils
of natural scarcity. A limitation
of supply by artificial causes, creates scarcity in order to create
property. It is within this latter
class that copyright in published works must be included. Copies of such works may be multiplied
indefinitely, subject to the cost of paper and of printing which alone, but for
copyright, would limit the supply, and any demand, however great, would be
attended not only by no conceivable injury to society, but on the contrary, in
the case of useful works, by the greatest possible advantage… The
case of a book is precisely analogous to that of a house, of a carriage, or of a
piece of cloth, for the design of which a claim to perpetual copyright has
never, I believe, been seriously entertained.”
In 1878, however, the abolition of copyright was to Sir
Louis Mallet “a question of the future.” That is still true. As he observed, “in a matter which
affects so large and valuable a property, and so many vested interests as have
been created under copyright laws, it would be both unjust and inexpedient to
proceed towards such a change as has been foreshadowed, except in the most
gradual and tentative manner.” By a
very simple change in our copyright legislation, the next important step forward
might now be taken. It is
practicable, in that it merely changes the date at which part of the already
existing and tested administrative machinery set up under the Copyright Act of
1911 comes into operation in the case of every copyrighted book; and,
further, in that the price policy already adopted by many publishing houses for
their most successful books already conforms very closely to that which the
simple change would ensure for all books which are reprinted after the first
edition. As long ago as 1771, David
Hume wrote to his publisher William Strahan: “I have heard you frequently say,
that no bookseller would find profit in making an edition which would take more
than three years in selling.” In
1876, John Blackwood told the Copyright Commission: “Every publisher now is
aware from actual experience that in order to reap the full benefit of a book,
he must work it in a very cheap form as well as an expensive one.” In our own day, it is surely the common
practice of publishers to issue a cheap edition of successful books very
promptly after the first expensive issue has served its purpose with the
circulating libraries. If the now
existing compulsory licence or royalty system (Copyright Act, 1911, Section 3) were made to
operate a few years - say five years - after first publication, instead of being
delayed as at present until twenty-five years after the death of the author,
security for publishers against competition would be preserved until their first
editions were either disposed of or “remaindered,” remuneration for authors
would continue on all sales throughout the full copyright period, and the public
would no longer have to wait more than five years for cheap copies of the books
they wish to buy. The first edition
might still be issued by the publisher at the price which best suited his pocket
under conditions of monopoly, but if he wished to retain the whole of the
business the compulsory licence system would then
194
compel him to follow the present practice of many
publishers and reissue his successes before the end of the five-year period at a
price low enough to deter competitors. There is, of course, nothing to prevent
the successful sale, side by side, of a number of editions by various publishers
at different prices and in different formats; and in many cases the author’s
remuneration from his 10 per cent royalty under the compulsory licence system
would be greater than it is at present. There remains the theoretical objection,
which we have already noticed in connection with the existing royalty provision,
to fixing one percentage of royalty for all books and to giving authors a share
in the value added by paper-makers and printers and binders to the more
expensive editions; but their practical significance can hardly be deemed to
outweigh the obvious public advantage to be derived from the change. The most widely read authors would still
secure the greatest royalties from books selling at the same price, and
something can even be said for allowing authors additional remuneration if their
books are capable of sale in expensive as well as cheap editions. The change would, of course, tend to
reduce the volume of risk-taking on purely speculative publications - a
consequence which, it has already been argued, is hardly likely to involve any
considerable impoverishment of our literary heritage. Particular cases might still form the
subject of special provision. The objection might be raised
that academic texts and scientific treatises, which undergo constant revision
for each edition, might then be reissued in obsolete condition; but with the
adoption of the system, authors would surely see the wisdom of permitting the
necessary alterations to be made to keep reprinted editions up to date. Drastic modifications would no doubt be
made to an increased extent in the form of entirely new works - a development
which indeed from other points of view has much to commend it. There cannot be any question that it
would be in the public interest to ensure low prices for books as early as
possible after the fate of the first edition has revealed that a demand exists
for them; and it is an important feature of the proposed amendment that it
involves no new administrative principle, that it enables the continuance of, if
not indeed an increase in, the remuneration of authors whose books the public
want, and lastly that it simply confirms and extends throughout the
book-publishing business the price policy which successful publishers already
pursue in their own interests.
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The Competitiveness of Nations in a Global Knowledge-Based Economy