The Jobs Argument for SOPA and PIPA or for Broader Copyright, More Generally, Represents a Perfect Example of Frederic Bastiat's Broken Window Fallacy

In that sense, the jobs argument for SOPA [Stop Online Piracy Act] and PIPA [Protect Intellectual Property Act] or for broader copyright, more generally, represents a perfect example of Frederic Bastiat's Broken Window Fallacy. Writing in 1850, Bastiat emphasized the need to account in economics and politics both for that which is seen and that which is not seen. ("Ce qu'on voit et ce qu'on ne voit pas.") When a boy breaks a shopkeeper‘s window, the shopkeeper must employ a glazier to fix it. If we focus solely on the employment of the glazier—that which is seen—then one might conclude that the government should hire children to go around breaking windows in order to increase the employment of glaziers in the economy. However, as Bastiat cautioned, we must also account for that which is not seen. Because the shopkeeper had to spend his money on the glazier, he could not spend that money elsewhere: on new shoes or a new book for his library. When we account for this lost spending elsewhere—that which is not seen—we find that the broken window generates no net stimulus to employment. The glazier earns more; but whoever would have received that money but for the broken window—whether cobbler, bookseller, or another—earns exactly that much less.

The mercantilist argument for broader copyright suffers from much the same fallacy. It urges us to focus solely on that which is seen—the increased revenue and enhanced employment broader copyright brings to the copyright industries. It asks us to ignore that which is not seen—the reduced revenue and diminished employment broader copyright brings to every other sector of the economy. Once we account for both that which is seen and that which is not seen, we find the mercantilist argument for broader copyright entirely empty. Just as the broken window generates no net stimulus for the economy, so too does broader copyright. Whatever increased revenue broader copyright generates for the copyright industries, it simply takes from elsewhere in the economy.

--Glynn S. Lunney Jr., "Copyright's Mercantilist Turn," Florida State University Law Review 42, no. 1 (Fall 2014): 99-100.