LOCHNER IN CYBERSPACE: THE NEW ECONOMIC ORTHODOXY OF "RIGHTS MANAGEMENT" JULIE E. COHEN * Originally published 97 Mich. L. Rev. 462 (998). Ninety-three years ago, in Lochner v. New York, the Supreme Court struck down a maximum-working-hours law for bakers as an impermissible invasion of employer-employee liberty of contract and, by implication, of the employer's property rights in his business. Lochner came to symbolize, and was vilified for, a vision of state power as rigidly circumscribed by the operation of judicially-determined laws of social ordering. By the late 1930s, the Court had changed course and accepted that the states' police power - or, in the case of Congress, the commerce power - encompassed even protective regulation of the parameters of the private employment contract. Within the modern legal academy, "Lochner" has become an epithet used to characterize an outmoded, over-narrow way of thinking about state and federal economic regulation; it goes without saying that hardly anybody takes the doctrine it represents seriously. In fact, however, the economic vision embodied in Lochner is alive and well on the digital frontier. Its premises - the sanctity of private property and freedom of contract, the sharply delimited role of public policy in shaping private transactions, and the illegitimacy of laws that have redistributive effects - undergird a growing body of argument and scholarship concerning the relative superiority (as compared with copyright) of common law property and contract rules for protecting and disseminating digital works. In their contemporary incarnation, these premises are embedded in the rhetoric of economic efficiency. In place of social contract theory, their proponents argue from purportedly neutral, scientific truths about the way markets in general, and information markets in particular, operate. These truths, I shall argue, are nothing of the sort. Rather, they are "just-so stories" that mask the need for first-order social welfare choices about the sort of information society we want to have. Their proponents, whom I christen the "cybereconomists," argue that the most efficient legal regime, measured by its success at inducing the creation of digital works and increasing consumers' access to information, is that which permits copyright owners to maximize control over the terms and conditions of use of their digital property. However, the economic case they build is anything but convincing. It is based on an essentialism about the nature of "contract" and "market" that is manifestly unsuited to mass-market transactions, on a reflexive and unsubstantiated distrust of the legislative process as compared with the market, and on assumptions about the nature of "property" and the best ways of managing it that are wholly unproven and arguably unjustified in the case of creative and informational works. Taken together, the cybereconomists' arguments and proposals amount to ideology, not science. Designing the optimal regime of rights in digital works requires, instead, explicit choices about the degree of author/publisher control, and the extent of freedom from such control, that society finds desirable. Part I of this Article describes the economic models now proffered as the basis for defining rights in digital works, and explores their striking resemblance to the system of social ordering described and advanced in the Supreme Court's Lochner-era decisions. The ghost of Lochner is not invoked lightly, nor with intent to belittle. Lochner represented a particular ideal of social ordering, premised on a seamless convergence of the private-law institutions of property and contract to provide a zone of legal insulation for market outcomes. In the physical world, that vision has long been compromised by evidence of market failures that all but the most die-hard Chicago school economist cannot help but acknowledge. The cybereconomists' argument, in essence, is that cyberspace more closely approximates theconditions necessary for perfect markets, and that under these conditions, a legal regime based primarily or even exclusively on the private-law institutions of property and contract is appropriate. This argument, moreover, has found favor with government policymakers, who have used similar reasoning to frame legislative and treaty recommendations. It is both fair and important to ask whether en route to their conclusions, the cybereconomists have corrected the Lochner Court's methodological lapses, or simply reproduced them. Part II demonstrates that the cybereconomists' debt to the social ideology of Lochner runs deep. Their proposals turn out to be grounded in identical beliefs about the conceptual primacy of private property and private ordering and the illegitimacy of "redistributive," market-distorting legislation. As a result, their models are neither scientific (in the sense of describing an ineluctable reality) nor neutral, but rather normative and contingent on the very same institutions and arrangements whose absolute efficiency they seek to prove. Their failure to conceive of contract as anything less than voluntary and (definitionally) private, or of property as anything less than complete control, blinds them to the socially constructed nature of the existing mass market for creative works and prevents them from seriously considering whether a regime based on limited ownership rights might be more effective at promoting access and progress. I argue that in light of the special nature of creative and informational works and of creative and intellectual progress, there is substantial reason to believe that a limited-ownership regime is better suited to furthering these goals. Part III begins the project of developing a stronger, more defensible economic model for digital intellectual property rights. As a tool for understanding information markets, the neoclassically-grounded economic theory to which the cybereconomists subscribe is fatally incomplete. In particular, critiques of the neoclassical paradigm supplied by institutional, welfare-theoretic, and political economists
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