Lies, damned lies, and “piracy” statistics

On the same day that Texas Representative Lamar Smith deferred consideration of SOPA, he published a column titled “Why we need a law against online piracy”. The lede paragraph repeated the SOPA/PIPA mantra that “Illegal counterfeiting and piracy costs the U.S. economy $100 billion every year.” A few hours ago, the Texas branch of PolitiFact published an analysis of that claim.

Truth-O-Meter reading: False

To carry out its analysis, PolitiFact started by talking to Smith’s staff to determine the basis of the $100 billion figure. Turns out it’s a year-old report from the International Chamber of Commerce. That report pegs the annual world-wide value of “counterfeit and pirated goods” at $650 billion, with the U.S. share between $66 and $100 billion. The report states clearly, though, that its figures do not represent business losses, and this disconnect was confirmed by an official of the International Chamber who was also contacted by PolitiFact. (These guys are thorough!)

The official noted that the figures were based on a 2008 study and that they made the admittedly questionable assumption that each “pirated” item would otherwise have been purchased at full retail value. In the end, even this official conceded that the economic costs of piracy cannot be pinpointed.

PolitiFact also referred to the well-known GAO report that concluded “it is difficult, if not impossible, to quantify the economy-wide impacts” of counterfeiting and piracy. When PolitiFact went back to Smith’s office with these observations, he stuck by his statement, and said: “Since the U.S. is the largest producer of (intellectual property) that is consumed around the world, one can surmise that a significant amount of that total value is taken from the U.S. economy.”

In PolitiFact’s judgment, when you take a series of imprecise and uncorrelated estimates and turn them into a definitive numerical result, that counts as a lie, even in Texas.

There’s an overwhelming sense of déjà vu here. 5 years ago, I was in the midst of an ongoing Congressional battle (spearheaded, not surprisingly, by the same Lamar Smith) to require U.S. campuses to filter infringing material from their networks. In hearing after hearing we were confronted by an MPAA statistic that 44% of their losses from infringement were due to college and university networks. Repeated requests for details on this figure — including at least one from Sen. Pat Leahy’s office — went unanswered.

And then, out of the blue, the MPAA issued a statement: “Did we say 44%? Oops, no, we meant 15%. Sorry, human error.” More important, they released the report itself, and an even larger mistake immediately surfaced: Even if accurate, the 15% figure was based on college students, not college networks. Since only 20% of students lived on campus, turning off every college network in the country might have solved at most 3% of the MPAA’s problem.

44% vs 3%? We didn’t have PolitiFact back then, but the scent of burning pants lingers.


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