which had been written elsewhere, particularly in england. as the balance of american authorship changed, the united states finally granted copyright protection to international authors ( as well as its own ), but in order to continue to provide protection to american typesetters, insisted that this copyright protection extend only to those foreign works that were typeset in the united states. this provision remained until the mid 1960s. while we have noted that where governments do not lay down rules, private individuals will tend to work out their own set of rules, perhaps the most interesting cases are where individual producers have managed to set the rules and then coopt the state to enforce their rules. at one level, one might ask why our own authorities should prevent us from buying fake brand - name designer - goods, and pirated cds and software, when the main beneficiary of the higher prices we currently pay is a foreigner. this is obviously a controversial area, and before i get into trouble here, i should also acknowledge that as soon as we admit that there are legitimate things such as intellectual property rights, then there is a strong case for getting the state ’ s apparatus to defend these, in the same way that it defends other property rights such as our cars and our houses. but having acknowledged the importance of the concept of intellectual property rights, the unanswered issue then is exactly what value we should put on these. when i go to buy a copy of microsoft windows for $ 200, say, is this the “ correct ” price, in the sense of giving an appropriate incentive for software producers to go on producing software and selling it in australia? there is clearly a powerful case for such protection ( to reward and encourage innovation ), but one would have more faith in the economic rationale behind this if it were not so heavily based on legislation and rules from the horse - and - buggy era. is the duration of a patent, as legislated for the steam age, still appropriate for the electronic age? should the idea of a patent be so wide as to allow, for example, proprietary control of an industry standard? i find this a fascinating area, and could be drawn into this debate on whether patent protection should be provided for general ideas ( the classic example is amazon ’ s protection for the idea of “ single - click purchasing ” ), but this would take me too far afield. i have strayed well outside the usual territory of central bankers, and i am going to get back,

information goods or knowledge goods are far more important in consumers ’ purchases, and are readily internationally traded. the central characteristic of these goods, which takes them outside the bounds of the simple free - market equilibrium model, is that the marginal cost is much less than the average cost. this not only applies to “ weightless ” knowledge goods, but for many physical goods, the cost of producing the first is enormous ( research and “ tooling up ” costs ), while the cost of producing another unit is minimal ( eg pharmaceuticals ). the usual rules of economics are either inapplicable or their application is vastly more complicated. no longer will a producer increase output until marginal cost equals price. under old - fashioned goods, the main effort by the producer is to make them more cheaply through more efficient use of capital and labour inputs. but for goods whose marginal cost is low or zero, the producer has to find a way of avoiding selling goods at marginal cost, because this would leave total costs unmet. to add to the inconvenient lack - of - fit with the free - market equilibrium model, information goods and many of the new service goods have the characteristics of public goods : in the jargon, they are both non - rival and non - excludable - one person ’ s consumption does not diminish the availability for others, and it is difficult or impossible to exclude one person from consuming these goods. add to this the idea of networking goods ( where the number of consumers of the network increases the benefit to each of them, such as a telephone system ), and the greater opportunities for “ winner - takes - all ” outcomes ( where the world - renown sport or entertainment star displaces all the local heroes ), and the market dynamic differs greatly from the textbook model. these characteristics force producers in two important directions - towards creating some elements of monopoly attaching to their production, and to seek larger and larger markets. larry summers ( 2000, p 2 ) captures the first point this way : “ the constant pursuit of that monopoly power becomes the central driving thrust of the new economy. ” on the second, zuckerman ( 1998, p 20 ), in triumphalist mode, says : “ on the brink of the 21st century, the united states is at a point reminiscent of its entry into the twentieth. … today, of course, the new frontier is the global economy. ” there is a common belief that the most obvious manifestation