[T]he socially optimal level of copyright enforcement is higher than zero. A rights-holder is going to price access to his works at the profit-maximizing level. But there will always be people for whom access to the work is worth more than $0 but less than the profit-maximizing price. When those people infringe they gain a real benefit, but the rights-holder incurs no real loss.
His conclusion is that some copyright piracy is socially optimal. While he may be right, that argument is hogwash. He has unfortunately assumed a single price. If copyrights were perfectly enforced, there could be perfect price discrimination. Everyone would be charged different price for a license, so there would be no one who valued access to copyrighted material but couldn't afford it. Of course, this is unrealistic because of transaction costs, but that is a very different argument.
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