THE BENEFITS OF SOFTWARE PIRACY. Via the Technology Liberation Front, a study was released claiming that software piracy "resulted in a loss of $34 billion worldwide in 2005, a $1.6 billion increase over 2004, according to a study commissioned by the Business Software Alliance." This is moronic. As is typically the case with these industry sponsored surveys the method seems to have been to add up the number of pirated units, look at the retail price of one unit, and multiply the two together.
Obviously, though, many of the people who have unlicensed copies of intellectual property wouldn't have acquired the property if they needed to pay full retail price. As noted here, the survey "says the highest piracy rates are found in Zimbabwe and Vietnam, where it reckons 90 percent of the software in use is illegitimate." Virtually nobody in those countries could actually afford retail software. Windows Home Edition costs 33 percent of Zimbabwe's per capita income.
What these surveys mostly reveal is actually the benefits of unlicensed copying. The actual market for intellectual property in very poor countries is tiny. The benefits of free intellectual property to consumers too poor to buy it is, by contrast, large. Consequently, the deadweight loss associated with rigorous enforcement of intellectual property rules in poor countries would be extremely high and, thanks to TRIPPs, is increasingly real. Fairly strict enforcement of limited term copyrights in rich countries makes perfect sense, but as you go down the economic ladder more and more laxity is appropriate. Small losses to software company profits are easily outweighed by giant gains to third world consumers.
--Matthew Yglesias
