I think the exploration of transitional stages is very important. Sure, pointing to 50 years out is a useful exercise for framing the journey. But, people need immediate, real actionable ideas that are viable, at least to some extent, within existing paradigms. We are creatures of habit and inertia. We are not yet in an economy where sharing enables a large portion of the productive population to make a living--I don't know whether you claim this--and so thinking about steps towards our goal is useful. I grew up partially in the Soviet Union. That socialist experiment was stuck in a transition stage for 70 years.

Yes, the digital economy is a fact, as are sharing and MC=0. However, I think, it is more powerful to challenge the misuse of monopoly power on its own terms. When merely providing powerful actors a descriptive view of the world, they will attempt to change it or control it. Business men create barriers to generate excess return that flows to shareholders--this is the creed taught in this university, and every business school out there. I agree with you that this may not be a result we want in relation to cultural goods. Then why not ground the desired end-result in a driving principle. I recognize my indoctrination and to get to an alternate position need an approach that makes sense bottoms-up. Not merely as a conclusion.

Sure, public corruption. Alternately, distribution of utility, income, cultural goods, whatever. The questions boils down to who gets what. I agree with your conclusions on the distributional result. But I feel squishy about the dismissal of a desire to have a reason for the logic for distribution. This country decides to set taxes at X and achieves a gini coefficient. It is a philosophical argument that gets us to flatter income equality, not a guide on how to maximize deductions.

I will try to address, but I am not sure I understand the gist of the criticism. What I don't like is the idea of subsidizing production of digital goods. Kant's proposition of not using people as a means to an end seemed like a reasonable place to park that emotion. Using one set of people, without involving them or any sense of choice on their part, to benefit some group with which they are not in social contract (I don't believe that we are in requisite social contract with citizens of other nations) seems like using them as a means to an end.

Point well taken. I think it's a fuzzy distinction that goes to life of the author and fixed costs, and is probably out of scope.

I will try to look for examples of "cultural activity that a sufficient collection of people would voluntarily each pay a sufficient share of the costs". I think that's key to what I am trying to explore.

This is the crux of the matter. It is the normative philosophical principle according to which your distributive argument is being made. This is also why I tried to start with some reflection of my personal moral compass--perhaps not all of us agree with the distributive principle quoted above, or its superior justice.

Fair. I will focus on expanding this descriptive section to include sharing in a useful way, as well as provide other examples. I will try to learn more about this. No list of innovations is exclusive.

I need more help to understand the "economy" of sharing, and will steer the essay in that direction. I don't understand the other comment. Sharing is driven by its own ethical considerations (like the distributive princple you quote, and certainly others). There are essays out there arguing why those principles are appropriate (e.g, any of these links perhaps).

This pop-Rawlsian stuff isn't really necessary, is it? Why do we have to find some normative justification for a descriptive theory strongly confirmed by empirical evidence? That P=MC in free competitive market at equilibrium doesn't require moral justification any more than the Pythagorean Theorem does. It's a category error at the outset, isn't it?

We want access to music and the internet if born in New York or India. Less clear is how much access we want—perhaps there is a line to be drawn between necessary cultural goods (learning the classics) and luxury cultural goods (StarCraft? ). One empowers, lifts people from their station into the flow of human progress; the other entertains and distracts. The two are not synonymous in function and moral weight. The problem encountered in this distinction is who decides, and how.

Only once basic economic principles have been discarded in favor of some new theory of the moral economy. The question is whether to have a free market or to engage in creating monopolies for private benefit using public coercive power. The ethics of that decision may be discussed, I suppose, if they don't seem evident without substantial "re-theorizing." But those aren't the ethics of business models. Those are the ethics of public corruption.

What? I will admit that in general I am somewhat sympathetic to the position once expressed by a distinguished professorial colleague of mine in this law school: "Never lend money to a Kantian." But putting aside the teaching of half a century toddling around universities with respect to the heightened rate of immorality prevailing among moral philosophers, I have no idea how you have reached the conclusion that Kantians can't hold clearance sales. If this is a proposition you really want to defend, I think you need to spell it out more fully, with no steps missing, and be prepared to meet a good deal of vigorous skepticism,

Really? Textbooks may well embody knowledge it costs millions of dollars to produce and acquire: ask what it has cost us to learn what is presented in any text on planetary astronomy, for example. You're going to need an additional element or two to make out the particular line of distinction you are trying to set up here.

But, we cannot coerce businesses to generate cultural goods without covering fixed costs and financing costs.

Nor do we have to subsidize with private ownership privileges forms of cultural activity that a sufficient collection of people wouldn't voluntary each pay a sufficient share of the costs of having made. The use of state power to create monopoly only results in the coercion of those who are made to pay for cultural production which, once existent, they have as much right to share in as any other human being who happens to have a larger disponible income.

Arbitrarily charging those first in line and distributing for free to the rest of the world is unethical.

Unestablished. See above.

If advertising and data-mining are unethical as well, we must fund the product by user contributions and bifurcate paying users from non-paying users.

Not unless you can establish the very unlikely premise you are reusing above. Otherwise all we need to do is to adopt the principle of "from each according to his ability or her voluntary willingness to pay, to each according to his need or willingness to accept," and allow production and consumption of culture to reach the new, more just and not less satisfactory, equilibrium.

There must be enough paying users to get the product to the point where MC=0. Two ethical models have emerged: (1) auction, and (2) freemium.

No, if that's supposed to be an exclusive list. Pure sharing has also done fairly well, as has direct social subsidy to potential creators, for example.

At no point is it made clear why we need to foresee the large number of contexts in which people may choose to participate in the economy of sharing. We don't feel it's necessary, on the other side, to write essays explaining the two ethical business models for owning. We take for granted that the ecology of material society is complex: that there are many roles for participants in the market, and that the set is not closed, with clever people constantly inventing new ways of making a living. The same is true in the sharing economy, and this crabbed and static approach to analysis needs to be opened up more than a little if it is to avoid a framing error that we would never make on the other, more familiar side of the 21st century economy.

Ethically Appropriate Business Models

Introduction

Economic Axioms

Ethical Axioms

Onto Business

But, we cannot coerce businesses to generate cultural goods and then distribute them for free without covering fixed costs and financing costs. Arbitrarily charging those first in line and distributing for free to the rest of the world is unethical. If advertising and data-mining are unethical as well, we must fund the product by user contributions and bifurcate paying users from non-paying users. There must be enough paying users to get the product to the point where MC=0. Two acceptable models have emerged: (1) auction, and (2) freemium (up-sell, cross-sell or marketing).

In the auction set-up, people bid up to their willingness to pay for the free good. For some this is zero, for others it is a positive value. There are no ethical problems if people self discriminate, and there is evidence that established musicians are able to net significant returns in online auctions. Examples of this are Radiohead’s “In Rainbows” (1.2 million downloads), Nine Inch Nails ($1.6 million in one week), and Kickstarter ($75 million raised). Inherent in the auction model is a utility from the cultural good so positive that people pay a creator to express gratitude. The creator should be particularly good at signaling the quality and differentiation of the good from a commodity such that price does not equal marginal cost.

The second approach builds on the idea of differentiation, marketing and tiering value. Technology commentators advocate connecting with fans and generating a reason to buy. Again, the creator must prove that their good holds value separate from that of the free digital file or service. That value is either a truly superior experience that deserves compensation by choice, or comes bundled with a physical items whose marginal cost is not equal to zero (e.g., limited edition collectible sets /prints, t-shirts or signed items). Similarly, many technology start-ups use a freemium model to charge for superior service (which often is nearly identical to the free service) and provide the core service for free, which allows users to self-discriminate. We will thus continue to see core free offerings, bundled with highly targeted value propositions to fans and power-users.

Still, these models do not guarantee that fixed and financing costs are covered, especially for capital intensive and highly experimental projects that can have extremely positive payoffs but are not easily marketable and come with significant chances of failures. In that case, we need public subsidy to offset the innovator’s temptation to convert the public good into a club good. The categorical imperative does not allow us to use movie studios as a means to enrich others. A hybrid solution could involve some indication of private interest (via Kickstarter), a significant public subsidy once a goal is reached (how many people must want an Avengers movie?), and a Creative Commons license on the final good produced.