[T]he harm is a dynamic loss in allocative efficiency, which is much harder to quantify. That is, in the cases where a consumer would have been willing to buy an illicitly downloaded movie, album, or software program, we want the market to be accurately signalling demand for the products people value, rather than whatever less-valued use that money gets spent on instead. This is, in fact, very important! It’s a good reason to look for appropriately tailored ways to reduce piracy, so that the market devotes resources to production of new creativity and innovation valued by consumers, rather than to other, less efficient purposes. Indeed, it’s a good reason to look for ways of doing this that, unlike SOPA, might actually work.
It is not, however, a good reason to spend $47 million in taxpayer dollars—plus untold millions more in ISP compliance costs—turning the Justice Department into a pro bono litigation service for Hollywood in hopes of generating a jobs and a revenue bonanza for the U.S. economy. Any “research” suggesting we can expect that kind of result from Internet censorship is a fiction more fanciful than singing chipmunks.
While the second paragraph is correct, I would suggest, despite my lack of economic training, that “allocative efficiency” isn’t affected by copyright infringement. If the recording and distribution industry made their products cost-effective and convenient (like dropping all those mandatory trailers on DVDs) we’d allocate our expenditure efficiently to them.
Presently they don’t do that, and we allocate efficiently using time and other expenditure to avoid their troll-gate.