The hype of P2P file sharing

Todae entry will be contributed to economy.Firstly, i haven been bloggin for quite a while since the arrow internet change, from ains to nomadix. Anw lets start on with the topic.

Earlier todae in a debate, we talked about whether p2p software should be regulated especially in the music industry in which they say its harmful.The points which i looked up upon various literature sources and internet concluded that p2p is not at all that harmful despite the music industry such as RIAA and movies namely MPAA actively suing p2p sites of distributing works and copyright infringement.

First of all, p2p software such as Limewire, bittorrent etc improve free trade, and actually is a perfectly competitive market. In a perfectly competitive market, the price of which unit sell in a competitive market is therefore equal to the cost of production..This theory is first pioneered by Adam Smith in the book Wealth of Nations.

Free market have the capacity to make decisions depicted as the invisible hands and allocate resources more efficiently than could ever be achieved with central planning.The presence of RIAA and MPAA represent a source of market failure because essentially they are monopolist. They are the largest association of producers of CDs and movies and they represent producers who sell their goods at a price much higher than the marginal cost of production. They are doing it by only producing enough goods to sell at people who are willing to pay that amount of price e.g. $ 20 per CD.

Because the market is not free and price is controlled by the monopolist, a large numbers of consumer exist who would be willing to pay near the marginal cost of production but had no legal means of doing so. Therefore a black market effect occurs.Black market is created for people to satisfy that demands by selling the same goods at a much lower price than what has been set.This black market example is pirated CDs and P2P software for downloading music and movies for free.

There is another advantage of P2P software which is termed as the sampling effect.People can have a feel of what music they are listening to before deciding to buy the cd itself.P2P also brought people who were previously not listening to music to the industry, in other words, attracting new customer.

The main argument brought forth by the RIAA and MPAA is that if the marginal benefit to cover the opportunity cost is zero than there is no economic incentive to produce that good at all such as music and movies. Thus they say, artist wont produce song because they cant find a reason to.
The fact is even if you get ur stuff through others means such as downloading and ripping cds, that is not at all free. U have to pay for blank cds, u have to pay for equipment for burning it, you have to spend time to do it which could be spent at doing others things which is more beneficial. In P2P the associated risk is downloading low quality file, spyware and virus due to lack of strong protection in individual’s computer which in one way or another incur some kind of cost. So its unlikely at all that the cost will become zero. The solution that i had thought of is to sell song at price low enough to satisfy that large demands rather than selling it at the people who are willing to pay 20 bucks. The marginal profit for each good will be lower but the actual sales figure will dramatically increase thus even things out.

Or the music industry could find someway to make buying CDs more attractive compared to downloading song such as offering goodies along with the CDs that is not possible through P2P. As strategic management say, differentiation is what make your company better than others.Its all about competition.

What the government should do in the case of market failure is to actually shift the equilibrium back to where it should be, the perfectly competitive market. Any binding change to the market itself will cause social marginal benefit to decrease overall.This is also known as deadweight loss.

Beyond the scope of music and movies industry, dun even think about it. The benefit of P2P software is huge, the software can be used for integrated file sharing across departments, in scientific fields and much other.

Therefore, i have reach to a conclusion that P2P software should not be over-regulated by industry trying to lobby the government to maximise their own profit, and the ad in cinemas saying you would not steal a car, a bag or tangible stuff is rubbish. Its not about moral, its about economic sense.


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