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The problem with copyright is it tries to create artificial scarcity. That worked with paper books, (I know that copyright covers more than books) but with digital books its almost impossible and usually impractical. With some mediums, like music, television, and movies, creators can still create scarcities. Musicians can make money from live performance and merchandise. The primary profits for movies comes from theaters, where moviegoers pay for the experience more so than for the movie. And of course television makes its money from advertising.
As far as things like books, pictures, web designs, etc, I don't know how you can create scarcities. Cory Doctorow says that the most valuable asset a writer has is his relationship with his readers--that if an author connects with his readers they will buy his books even if they could get them for free. To put it another way, you are less likely to steal from someone you know and like then from a stranger. This strategy works for writers like Doctorow and Peter Watts, but I don't know how it would work if most writers were doing it. Its one thing for a few hip and transgressive individuals to do something, but its entirely different on a large scale.
As far as the moral arguments, I don't see how you can logically argue that we should pay for works that we can get for free just because that is the right thing to do, and then say that a system based on freely giving and taking is impossible because people are immoral or are apt to take more than they give. Your trying to appeal to someone's morality because the alternative system they propose cannot be supported because of their inherent and immutable immorality.
So this is the problem: a market system is based on the notion that everyone acts in their own self-interest. What's better than free? You can argue that in the long run not paying for stuff would have disastrous consequences for society, but in the long run we are all dead.
I don't really have much of a point actually. I'm just wondering about how much government policing and control over the internet people will put up with to ensure there is no piracy. Sometimes copyright defenders can be overzealous, but I also think its clear that many sites that free-culture advocates defend (thepiratebay, megaupload) are dedicated to pirating and probably should be shut down.
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