Thoughts on Black Markets

by on May 30, 2007

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.

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