2. Murder is stealing
someone's life.
“Coveting thy
neighbours wife” might
be considered to be theft
also.
Tax avoidance is
stealing from the
It is sometimes said that government and
from those who
there only needs to be might have
benefited from
one law... do not steal. public spending.
http://manolaw.blogspot.co.uk
www.examiner.com
http://indianblogger.com
www.sodahead.com
3. Why is stealing wrong?
Stealing diminishes... the person stolen from has less left.
The assumption underpinning this idea is that the victim has a
right over the property in question. They are said to 'own' the
property. These items are known as Private Goods.
In Economics the idea of property rights is very important.
http://artsammich.blogspot.co.uk/2011/09/stealing-apples.html
4. Common Goods
There are things which don't A classic example of a common good
are fish stocks in international waters;
belong to anyone, so consuming no one is excluded from fishing, but
them is not stealing. Economists as people withdraw fish the stocks for
call these common goods. later fishermen are potentially
depleted. To describe situations in
which people withdraw resources to
secure short-term gains without
regard for the long-term
consequences, the term
tragedy of the commons was coined..
(Source: Wikipedia)
Like private goods, common
goods are diminishable.
However, they are not excludable
i.e. it is difficult to assert property
rights over them and stop people
taking what they want.
http://www.fao.org/fishery/topic/13701/en
5. Free Goods
Free goods also don't belong to
anyone, but unlike common
goods they are non-
diminishable as they are not
scarce. Consumption of a free
good has zero opportunity cost
to society.
Is an idea a free good?
Imagine your neighbour has bought some new garden furniture. It looks
great. If you took the furniture it would be stealing; it is a private good.
However, if you take the idea of getting some similar garden furniture you
are not diminishing the neighbours possessions and they can't exclude
you from copying the idea. Therefore the idea of the furniture is a free
good. Or is it?
http://en.wikipedia.org/wiki/File:Hudson_river_from_bear_mountain_bridge.jpg
6. Guinness' widget Downloadable music
Downloading a track
Guinness spent £5m does not diminish the
inventing the widget. A amount left for
widget is a small plastic everyone else. The
ball which flushes track is infinitely
nitrogen through the drink replicable at effectively
when a can is opened no cost.
making it taste more like
draught beer. Are digital products
free goods?
Whilst the idea of the widget and the digital
tune are not scarce and can be reproduced
infinitely without cost, they did require
scarce resources to produce them in the
first place. Therefore the law is often used
Is the idea of the to turn these free goods into private goods.
widget a free good or a These laws are copyrights and patents.
private good? They require us to treat unique ideas as
'intellectual property'.
7. Is theft always an economic bad?
We have learnt that property rights can make make a free good into a private good.
We have also learnt, from a very young age, that stealing is bad. Therefore we can
conclude that stealing other people's (legally protected) ideas or digital products is
wrong. In economics, this is a normative assertion. However, we are not moral
philosophers so let's leave behind morality and explore what actual damage theft
does, or does not, cause in an economy.
Question Question
Why is it important in economics to For how long should other firms
have laws which turn free goods, be prevented from copying
like Guinness' widget idea, into Guinness' widget idea?
private goods?
The economic answer to this is all about Guinness should be allowed to 'own'
incentives. What incentive would there the idea for long enough to make a
be for Guinness to spend £5m on good return on their investment. After
developing the widget if every other firm that time, the law allows other firms to
could immediately copy the idea? copy the design. In other words the
However, if this idea is theirs forever they good is no longer private, it reverts to
can take advantage of this by charging an being a free good. The widget was
inflated price to consumers, which we Guinness' intellectual property for 5
don't want. This begs the next question... years.
8. Watch this... (warning - 16+)
http://youtu.be/xuxO6CZptck
What are the economic reasons for
discouraging the purchase of illegal
copies of films?
Why is it necessary to make adverts
to discourage people?
This 'IT Crowd' satire on the original advert by the Federation Against Copyright
Theft (FACT) is a form of theft in itself. The central ideas and style of the original
video and reproduced. Somehow it doesn't feel like theft though. Why not?
Sounds Like Teen Spirit...?
Watch this classic Nirvana video http://youtu.be/hTWKbfoikeg and listen
particularly to the chorus. Now listen to this.... http://youtu.be/SSR6ZzjDZ94
This hit by the band Boston preceded Nirvana's Smells Like Teen Spirit by
many years. It would appear that the chord structure of the Nirvana song is
'borrowed' from 'More Than a Feeling'.
9. Nirvana probably weren't ripping off Boston. The chorus is a
classic 'power riff' which is used in many rock songs.
However, Kurt Cobain, lead singer of Nirvana, admitted this...
Theft or “I was trying to write the ultimate pop song. I
inspiration? was basically trying to rip off the Pixies. I have
to admit it. When I heard the Pixies for the first
time, I connected with that band so heavily that
I should have been in that band—or at least a
Pixies cover band. We used their sense of
dynamics, being soft and quiet and then loud
and hard”
Source: http://en.wikipedia.org/wiki/Smells_Like_Teen_Spirit
In the Guinness example, by protecting the idea and
making it the intellectual property of the firm we were
ensuring there was an incentive for innovation.
In the arts we must also protect property, for example
stopping illegal downloading or piracy. However, we must
also make sure we don't discourage future innovation by
preventing artists being inspired by past work.
http://www.ipad-wallpapers.us/kurt-cobain-ipad-wallpaper/
10. STOP
Before we go any further, check you understand the concepts we have covered so far.
Private Good Free Good
Diminishability
Incentive to
Patent Innovate
Excludability
Common
Property Good
Piracy Rights
Copyright
Tragedy of the
Commons Intellectual
Property
11. A good must meet
THE BASIS OF TRADE three conditions for it
to be trade-able (i.e. to
make it possible for
the good to be
exchanged for money)
1. It must be own-able
(i.e. property rights can
be asserted)
2. It must be
excludable (i.e. you
must be able to stop
people just taking it)
3. It must be scarce
A Private Good can be provided through a market (i.e. not freely
as it meets all three conditions. available to anyone)
A Common Good cannot be traded as it is not Markets (where
excludable or owned (although it is scarce). people go to trade)
can be used to
A Free Good cannot be provided through a market allocate goods which
as it is not scarce or excludable. meet these conditions.
http://www.bilaterals.org/multimedia/photos/Australia%20and%20New%20Zealand/Andrew_Weldon_Free_Trade_Cartoon.jpg.php
12. The curious case of the lighthouse
There are goods which can be owned but can't be traded. This is
because they are non-excludable.
The owner of a lighthouse
cannot stop passing ships
benefiting from the warning
light. The good is also non-
diminishable as one ships
consumption of the service
does not stop another ship
benefiting. A lighthouse
cannot charge for its services.
A lighthouse is a Public Good
http://www.taracasa.com/archives/1611
13. What if the lighthouse owner
asked the passing ships to make
a voluntary contribution?
This would work until a ship
decided not to pay and benefit from
the lighthouse anyway! If the other
ship-owners found out then they
might decide to stop paying too and
the whole system would fall apart.
This is known as the free-rider
problem. It is the reason that
public goods can't be provided
through a market.
14. SUMMARY
Type of Owned? Excludable? Diminishable? Provided by
Good a market?
PRIVATE YES YES YES YES
GOOD
FREE GOOD NO NO NO NO
COMMON NO NO YES NO
GOOD
PUBLIC YES NO NO NO
GOOD
Memory technique...
Bill is a fisherman. Every day he sets out to sea to fish (the fish stocks are a Common
Good). The fish he catches are now his (a Private Good). His friend Jake thinks Bill's
way of making a living is a good idea (the idea is a Free Good). He buys his own ship.
Both Bill and Jake are kept safe by the lighthouse which guides them away from the
rocks (the lighthouse is a Public Good). Soon, all the villagers are copying Bill and Jake
and the fish stocks begin the dwindle (the Tragedy of the Commons).
15. What type of good are each of the following?
Air This
presentation
Roads
Software
Sunshine
Free drink
with every
meal A forest
Oil reserves
A free App
A park
