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No. of Recommendations: 8
This is an issue I've wrestled with for many years with regards to software piracy.

Ideally, the reward for the procucer should be in line with the value created for society.

A system of free distribution and free use creates the greatest total value for society by giving everyone the opportunity to use a product as much as they like without cost affecting their amount of usage.

In such a system, in order to provide incentive for producers a way must be found to determine the total value created by a product and a tax structure must be created whereby revenues will be generated which can be used to compensate producers. It is very difficult to create a system that taxes and compensates in the most ideal proportions.

In the real world we see an attempt at this in the way highways are built, maintained and patrolled largely from revenues generated by gas taxes. It's not a perfect allocation of resources, but probably is the the best way to provide free access and free usage to the highway system.

In the computer software world, I believe Apple's model may be the best at creating the greatest total value. Many applications are distributed freely, but the cost is absorbed in the profit margin on the CPU, with professional users typically paying a higher premium up front than consumers. Apple's base level applications are everything the low end user needs, but high end users can purchase additional tools as needed with an incremental increase in total cost.

In the music industry, a model where musicians make their money off of performances, while distributing their recordings freely makes the most sense to me. Of course the dominant music industry model involves huge expenditures by record companies to promote musicians and purchase airtime on pop radio stations. In my mind this (undesirable) cost of promotion is what creates this largest gap between the incremental cost of producing a CD and the end cost to the consumer, and creates undermines the entire system.

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