by RAY FISMAN & TIM SULLIVAN
The way book authors get paid these days is pretty straightforward: publishers keep careful track of how many books they sell and pay authors a royalty — agreed upon when the contract is signed — of each sale. Authors can check sales figures using resources like Bookscan or their own accountants. Royalty rates are well established throughout much of the industry. Everyone is protected by copyright. Easy peasy.
The playing field hasn’t always been so level. As Johann Wolfgang von Goethe observed in 1797, “the publisher always knows the profit to himself and his family whereas the author is totally in the dark.” This problem of lopsided information was aggravated by the near-absence of copyright protection in the 18th and 19th century. A bestseller could be expected to spawn an abundance of pirated versions. Charles Dickens, on his first trip to the United States in 1842, complained endlessly about the pirating of his works for the U.S. market. This lack of intellectual property protection led to further conflicts of interest and opinion between authors and publishers: it was standard practice among publishers — even respectable ones — to have multiple print runs without an author’s permission, and writers sometimes tried to sell near-identical editions of the same title to multiple publishers. Because authors couldn’t trust the sales numbers if and when their publishers provided them, 19th-century book contracts were for a fixed fee rather than per-copy royalty payments.
All of this drove Goethe nuts. Like many artists, Goethe had an uneasy relationship with money in the first place. He was on the one hand disdainful of the profit motive (he once wrote to a publisher, “I look odd to myself when I pronounce the word Profit”), and yet he referred to the asymmetry of information as “the main evil” of publishing. He wanted to ensure that he got his fair share of the fruits of his labors, and to this end he employed various ruses and strategies to ensure that his more materialistically minded publishers didn’t exploit him. Among the most intriguing of these schemes was the peculiar auction he devised for the sale of the manuscript for his epic poem, Hermann and Dorothea.
Goethe wasn’t planning on awarding the manuscript to the highest bidder — the kind of auction you might picture at Sotheby’s for fine art, where the auctioneer raises the price with each bid until the sale price is reached (what’s known as an “open ascending price” or “English auction”). Instead, Goethe engineered the following mechanism, as he explained to Mr. Vieweg, his publisher, in a letter dated January 16, 1797:
I am inclined to offer Mr. Vieweg from Berlin an epic poem, Hermann and Dorothea, which will have approximately 2000 hexameters. …Concerning the royalty we will proceed as follows: I will hand over to Mr. Counsel Böttiger [Goethe’s lawyer] a sealed note which contains my demand, and I wait for what Mr. Vieweg will suggest to offer for my work. If his offer is lower than my demand, then I take my note back, unopened, and the negotiation is broken. If, however, his offer is higher, then I will not ask for more than what is written in the note to be opened by Mr. Böttiger.
What’s going on here?
The Millions for more
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