Musings on the Economics of Commercial and Open Educational Resources

I have a chapter about open educational resources that will be appearing in a book on trends and issues in instructional design and technology later this year. The chapter will be openly licensed and I’ll publish it here in full after it appears in the book. But Phil’s great post today about the price difference between digital and print textbook rentals has me wanting to post the chapter’s Summary of Key Principles. So here it is (with some links added to improve readability):

1. Education is sharing. Ideas, knowledge, skills, and attitudes are public goods. This means they are nonrivalrous and nonexcludable, and therefore easy to share.
2. Expressions of ideas, knowledge, skills, and attitudes captured in physical artifacts like books are private goods, meaning they are both rivalrous and excludable, making them difficult to share.
3. When concrete expressions of ideas, knowledge, skills, and attitudes are converted from a physical into a digital format, this changes them from private goods back to being public goods, once again making them easier to share.
4. Copyright law places artificial limits on our ability to use technology to share digital educational materials. This changes these public goods into club goods, once again making them difficult to share.
5. Educational materials published under an open license are called open educational resources (OER). When digital educational materials become OER, they are converted back into public goods. Over 1 billion openly licensed materials are published online.
6. Open educational resources are far better aligned with the core values of education (education is sharing) than materials published under an all rights reserved, traditional copyright. This closer alignment creates opportunities for less expensive, more flexible, more effective education.

This notion of club goods is closely related to my comment on Phil’s post, which I reproduce below:

Printed books are things a person can own and to which the First Sale doctrine applies:

The first-sale doctrine creates a basic exception to the copyright holder’s distribution right. Once the work is lawfully sold or even transferred gratuitously, the copyright owner’s interest in the material object in which the copyrighted work is embodied is exhausted. The owner of the material object can then dispose of it as he sees fit. Thus, one who buys a copy of a book is entitled to resell it, rent it, give it away, or destroy it. However, the owner of the copy of the book will not be able to make new copies of the book because the first-sale doctrine does not limit copyright owner’s reproduction right. The rationale of the doctrine is to prevent the copyright owner from restraining the free alienability of goods. Without the doctrine, a possessor of a copy of a copyrighted work would have to negotiate with the copyright owner every time he wished to dispose of his copy. After the initial transfer of ownership of a legal copy of a copyrighted work, the first-sale doctrine exhausts copyright holder’s right to control how ownership of that copy can be disposed of. For this reason, this doctrine is also referred to as the “exhaustion rule.” (https://en.wikipedia.org/wiki/First-sale_doctrine)

Publishers only control the price the initial sale of a printed book. When the new owner goes to sell it back, or rent it, or dispose of it in any other way, the new owner determines the pricing – not the publisher.

However, in digital land things are different. Publishers have worked hard to establish a licensing norm and copyright regime that insures that you never own any digital products – you simply license access to them. When the semester is over, there is nothing you own that you can resell to someone else – your password just stops working or your book deletes itself from your device, etc. (Some publishers provide “forever access,” but this is not ownership and does not enable secondary markets.)

By waging an active war on ownership of private property in the digital resources space, publishers insure there is no First Sale, which prevents any secondary market from emerging. This allows publishers to control the pricing of each and every transaction on digital, which guarantees that prices on commercial digital materials will always be higher than the prices on used physical materials (which includes rentals). Because in digital land, there is no “used.”

In terms of cost, the following relationships will generally be true:

printed commercial materials (new) > digital commercial materials > printed commercial materials (used) > OER