Cruel, Mean, or Lavish? Economic Analysis, Price Discrimination and Digital Intellectual Property

It is not because of the few thousand francs which would have to be spent to put a roof over the third-class carriages or to upholster the third-class seats that some company or other has open carriages with wooden benches .... What the company is trying to do is to prevent the passengers who can pay the second-class fare from travelling third class; it hits the poor, not because it wants to hurt them, but to frighten the rich .... And it is again for the same reason that the companies, having proved almost cruel to third-class passengers and mean to the second-class ones, become lavish in dealing with first-class passengers. Having refused the poor what is necessary, they give the rich what is superfluous.' This is an essay about economic analysis, price discrimination, and the world of digital content.

In the interest of full disclosure, I should warn the reader that in this Essay I will take a slightly different attitude towards the economic analysis of intellectual property than most, though perhaps not all, of the contributors to this fascinating symposium issue; I will be focusing on economic analysis as a type of rhetoric. By rhetoric, I do not mean bluster, nor do I mean to suggest that economic analysis is merely an apologia for conclusions arrived at for other reasons. I use the term "rhetoric" in a way closer to one of its positive classical senses: something between Aristotle's deliberative rhetoric and the looser sophistic concept, a way of interpreting and understanding "an incomplete, ambiguous and uncertain world."