1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar
Source link: http://archive.mises.org/14823/funding-for-creation-and-innovation-in-an-ip-free-world/

Funding for Creation and Innovation in an IP-Free World

December 1, 2010 by

The case against IP is not hard to make; patent and copyright (say) are artificial state-granted monopoly privileges that undercut and invade property rights. But the consequentialist and utilitarian mindset is so entrenched that even people who see the ethical problems with IP law sometimes demand that the IP opponent explain how innovation would be funded in an IP-free world. As I noted in The Creator-Endorsed Mark as an Alternative to Copyright:

I’m reminded of John Hasnas’s comments in his brilliant, classic article The Myth of the Rule of Law:”

What would a free market in legal services be like?

I am always tempted to give the honest and accurate response to this challenge, which is that to ask the question is to miss the point. … It is possible to describe what a free market in shoes would be like because we have one. But such a description is merely an observation of the current state of a functioning market, not a projection of how human beings would organize themselves to supply a currently non-marketed good. To demand that an advocate of free market law (or Socrates of Monosizea, for that matter) describe in advance how markets would supply legal services (or shoes) is to issue an impossible challenge.

With the advent of state IP legislation, the state has interrupted and preempted whatever other customs, business arrangements, contractual regimes and practices, and so on, that would no doubt have arisen in its absence. So it’s natural for those new to the anti-IP idea to be a bit nervous about replacing the current flawed IP system with … a vacuum. It’s natural for them to wonder, well what would occur in its absence? As I noted, the reason we are not sure is the state has snuffed them out. This is similar to the FCC which preempted and monopolized the field of property rights in airwaves just as they were starting to develop in the common law; now people are used to the idea of the state regulating and parceling out airwave or spectrum rights and might imagine there would be chaos if the FCC were abolished (for more on this see David Kelley & Roger Donway‘s 1985 monograph Laissez Parler: Freedom in the Electronic Media, as discussed in my post Why Airwaves (Electromagnetic Spectra) Are (Arguably) Property).

So, because people are bound to ask the inevitable: we IP opponents try to come up with some predictions and solutions and answers. Thus, in the end we must agree with Hasnas:

Although I am tempted to give this response, I never do. This is because, although true, it never persuades. Instead, it is usually interpreted as an appeal for blind faith in the free market, and the failure to provide a specific explanation as to how such a market would provide legal services is interpreted as proof that it cannot. Therefore, despite the self-defeating nature of the attempt, I usually do try to suggest how a free market in law might work.

So. How would content creators be rewarded in an IP-free market? I have tried to collect some answers in Innovations that Thrive without IP. I also came across some other ideas in TWiT 275 (81:45 to about 85:17). First they discuss the site Kickstarter, “a new way to fund creative ideas and ambitious endeavors…. Kickstarter is powered by a unique all-or-nothing funding method where projects must be fully-funded or no money changes hands.” As an example they discuss Scott Wilson’s use of the service to raise funds to sell watchbands for use with the new iPod nano (which has a clock interface). The set a goal of having $15,000 committed; as of the date of this post they have had almost $500k pledged. This guarantees enough funding and demand for the product to get off the ground.

They also discuss IndieGoGo, which allows projects to be funded. For example, people with low budget documentaries could post their project description to try to get funding. For example, one would-be documentarian wanted to do a film based on some collegiate a capella group;  he needed to raise $1000 and raised twice that. The hosts also mention the site Quirky.com, which enables “social product development.” This lets you outsource various parts of engineering or manufacturing or product development to others, and give them a cut of profits. And then there is the micropledging service The Point, used recently by Austro-libertarians Bob Murphy (to challenge Paul Krugman to a debate–$56k pledged so far) and Vijay Boyapati to raise almost $20k for the Mises Institute–see Jeff Tucker’s The Age of Micro-Patronage).

Update: Unbound: connecting authors to readers to publish books with no middleman.

{ 45 comments }

Dave Narby December 1, 2010 at 5:00 pm

Let me get this straight: Your post-IP solution to fund innovation is… Donations?

Seattle December 1, 2010 at 5:49 pm

Not at all. Investors who buy into these projects get something in return if it goes off the ground, and there’s also less risk because the money doesn’t change hands unless the project gets full funding. Unlike the state-based IP system, everybody wins.

Dave Narby December 1, 2010 at 7:46 pm

Except that the innovative product, once it comes to market, can be immediately copied by a company with a larger distribution and manufacturing system, destroying any profit margin the innovator had, *and the result is the investors lose their money*. An altruist might ‘invest’ in a scheme like that, but that’s about it.

Therefore, without IP, innovation needs to be made in secret, and then brought to market quickly enough that copy cats cannot impact their profits faster than it takes to make back the money expended on innovating, and also to eke out a profit.

This clearly gives an even *greater* advantage to large, multinational corporations, who have the resources to keep it secret and bring it to market quickly.

Great system if you’re Apple, GM, Coca-Cola, etc. Not so much if you’re a small to medium sized business.

Do we really want to give more advantage to the corporatist? It appears that’s what the anti-IP crowd wants, because that would be the logical result.

Sovy Kurosei December 1, 2010 at 9:05 pm

Dave Narby

This clearly gives an even *greater* advantage to large, multinational corporations, who have the resources to keep it secret and bring it to market quickly.

Large multinational corporations are just that much bigger targets for corporate espionage. Also it is hard enough to keep a secret between two people. Bringing more people on board just increases the chances of that secret running wild and free. Ironically one of the examples you listed later, Apple, lost a prototype of the iPhone 4 in a bar that a Gizmodo editor picked up.

Dave Narby

Great system if you’re Apple, GM, Coca-Cola, etc. Not so much if you’re a small to medium sized business.

If it is such an awesome system then why do companies like Disney use lobbyists to extend the duration of copyright? If a world without IP protection is so great why do those companies not lobby the government to remove all patents? I’m sure Monsanto would like to see a world without patents! I think I’ll give a benefit of a doubt that the directors at a large, multinational company can do better cost and benefits arithmetic for themselves than a blogger on the internet.

Dave Narby December 2, 2010 at 12:03 am

You completely ignore the point that sans IP the advantage goes to the multinationals with manufacturing and distribution advantages, to the detriment of small companies.

And lobbyists *in general* are a reason to reform the *entire* system. Cronyism is endemic. But if the answer to cronyism is to eliminate the legal system rather than reform it, then what will you be left with? The solution is to reduce regulation and remove exemptions for companies like Disney, which essentially bribed lawmakers to give it a exemption. No exemptions!

Stephan Kinsella December 2, 2010 at 3:37 pm

god, I can’t bear to read this Dave Narby’s musings any more. Sorry.

Peter Surda December 2, 2010 at 5:34 am

Dave,

the errors in your posts have been thoroughly debunked. You reaction is to run away from debates and then start a new one, repeating the same errors and pretending the previous debates did not occur.I wonder if you assume that repeating the same lie will make it true.

Dave Narby December 2, 2010 at 9:04 am

Your saying my points have been refuted is quite different from refuting them.

This article puts forth that without IP, innovators will be compensated either by crowd-sourcing angel investor funds, or by patronage.

The first doesn’t address the issue that the invention used for an example, the iPod nano watchband, that while innovative and patentable, is simple enough that some IP scofflaw can easily copy it and flood the market with copies. How well do you think that will work out for the investors?!

The second turns independent innovation into something that is funded like the arts are. Do we really want innovators to have to apply for grants at a future National Foundation for Innovation?

Those bent on destroying IP recognize no value in ideas, and advocate they should be owned by everyone. They are intellectual Communists.

nate-m December 2, 2010 at 10:48 am

Those bent on destroying IP recognize no value in ideas, and advocate they should be owned by everyone. They are intellectual Communists.

Quit trying to group people together with BS phrases that essentially mean ‘if you disagree with me then your a communist’.

The goal here for many people is to figure out a way that a society can run with the least amount of force and violence possible. Since ‘IP’ is utterly dependent on the use of governmental force then getting rid of ‘big government’ means getting rid of ‘IP’. You cannot have one (IP) without the other (government threats and violence).

The attempt by the article is merely to show one possibility of how things can be done through voluntary cooperation instead of extortion.

Dave Narby December 2, 2010 at 1:22 pm

“nate-m December 2, 2010 at 10:48 am

‘Those bent on destroying IP recognize no value in ideas, and advocate they should be owned by everyone. They are intellectual Communists.’

Quit trying to group people together with BS phrases that essentially mean ‘if you disagree with me then your a communist’.”

You conveniently ignore the “intellectual” portion of that declaration.

” The goal here for many people is to figure out a way that a society can run with the least amount of force and violence possible. Since ‘IP’ is utterly dependent on the use of governmental force then getting rid of ‘big government’ means getting rid of ‘IP’. You cannot have one (IP) without the other (government threats and violence).”

That makes no sense.

If removing force from government is the goal you and the others have, then why focus on IP? It is hardly the biggest issue with regards to government using force.

A much better place to start would be with the unconstitutional use of our military, and/or the unconstitutionality of our monetary system, both of which are responsible for orders of magnitude more pain and suffering than the IP system.

” The attempt by the article is merely to show one possibility of how things can be done through voluntary cooperation instead of extortion.”

To which end it failed.

Peter Surda December 5, 2010 at 2:58 pm

Your saying my points have been refuted is quite different from refuting them.

So why do you run away from debates then? This behaviour of yours is thoroughly documented.

This article puts forth that without IP, innovators will be compensated either by crowd-sourcing angel investor funds, or by patronage.

No. The article explains that there are methods of compensating “innovators” that do not require IP. It does not say there are only two. There is an infinite number of business models. I believe I listed a handful of them about two years ago already when I started participating in the debates, I dug out the list now just for you: “deception, dumping, cost accounting, product lifecycle management, marketing, bundling, vendor lock-in, vapourware, trusts”. IP proponents like you insist on the inefficient business models (due to some weird personal biases) and then come up with a fallacious theory to mask their biases.

They are intellectual Communists.

Rather than us being communists, you are a mercantilist. You advocate the forceful elimination of competition on the pretence that this is better for the society.

BioTube December 1, 2010 at 9:23 pm

Reverse engineering alone takes a good chunk of time; in addition, there’s branding, packaging, creating production lines, etc. Buying out the original creators is generally cheaper, especially when you factor in mindshare.

Dave Narby December 1, 2010 at 11:57 pm

Clearly, what you claim is no impediment, as China’s black market proves otherwise.

Stranger December 1, 2010 at 8:50 pm

No, the post-IP solution to innovation is the destruction of all capitalistic information industries.

Oh, you don’t want that? What’s wrong with you?

Dave Narby December 2, 2010 at 12:03 am

Could you elaborate please?

Dave Narby December 2, 2010 at 12:57 am

Sorry, monitor was turned down low and I missed that you had posted a link.

Excellent work there sir.

Stephan Kinsella December 2, 2010 at 8:07 am

It’s not excellent at all. It’s full of confusion. E.g. “copyrights originate with a producer, while patents originate with the state. One must “apply for” patent protection in order to be granted it, but one does not need to apply for copyright protection to receive it, one only needs to seek protection with the state when a copyright is violated, much as is the case when any other form of market-created property is violated. This makes a copyrighted intellectual property a product of the free market, as it is created by a producer of information for the benefit of consumers.”

Such an ignorant statement. You USED TO have to register a copyright to get one, and only recently has the state abolished this requirement and granted it automatically. I suppose if the state does the same one day with patents and declares you have an automatic patnet right to any invention you come up with, all you need to do is prove this *when you need to sue someone*, that “Stranger” will then say the state has now made patents the product of the free market too!

“We have known since Rothbard’s Man, Economy and State the difference between patents and copyrights.”

In fact, Rothbard is talking about contractual restrictions not about state-granted copyright or patent monopolies. In any case, the EXAMPLE he gives is a MOUSETRAP, which is an INVENTION which is what is covered by today’s PATENT LAW. So he is really talking about some private contract based form of patent law. How Stranger thinks this supports modern state copyright law is a mystery.

Stranger December 2, 2010 at 8:32 am

“Such an ignorant statement. You USED TO have to register a copyright to get one, and only recently has the state abolished this requirement and granted it automatically.”

What difference does this make? Property law evolves. The underlying principle is sound.

Stephan Kinsella December 2, 2010 at 8:50 am

So–if the state does the same one day with patents and declares you have an automatic patent right to any invention you come up with, all you need to do is prove this *when you need to sue someone*, will you then say the state has now made patents the product of the free market too? By this reasoning social security, obamacare, and the legal right to sue your building for rent increases, the right to a minimum wage, the right to sue your employer for sexual discrimination–these are all free market. Holla glory!

Dave Narby December 2, 2010 at 9:45 am

“So–if the state does the same one day…”

But that’s not the situation now, is it?

“By this reasoning social security, obamacare, and the legal right to sue your building for rent increases, the right to a minimum wage, the right to sue your employer for sexual discrimination–these are all free market.”

That is an astounding attempt to confuse the issue.

nate-m December 2, 2010 at 10:22 am

What difference does this make? Property law evolves. The underlying principle is sound.

Well it evolves and is unsound and getting more unsound by every evolution.

That is an astounding attempt to confuse the issue.

Not really. People that try to use patents and copyrights in the same sentence are usually trying to confuse the issue since they work completely differently from one another and are utterly unrelated in goals and scope. The only thing in common is that they both have a absolute dependency in a government’s threat of force to maintain them and simply could not exist in a truly free society.

Saying that patents and copyrights are merely different forms of property rights is just as valid as saying that universal healthcare, freedom from sexual discrimination, and minimum wage is all actually examples of property right. At some point when you distort the definitions of words enough you can make them mean anything you want as long as it sounds good and supports your agenda.

Stranger December 2, 2010 at 5:46 pm

Stephan Kinsella, you are employing fallacy #5. It has been pre-emptively refuted.

Peter Surda December 2, 2010 at 5:25 am

Let me get this straight: Your post-IP solution to fund innovation is… Donations?

Sound better than your “solution”, i.e. fraud.

Dave Narby December 2, 2010 at 9:38 am

Fraud? Where? How?

Peter Surda December 2, 2010 at 10:38 am

The intellectual fraud IP proponents are perpetrating, i.e. fabricating fallacious arguments in order to mask their personal biases.

Dave Narby December 2, 2010 at 1:13 pm

That’s not an argument.

Peter Surda December 5, 2010 at 2:40 pm

What is not an argument? I thoroughly explained many times where the fallacies are. Instead of confronting me, you chose to repeat the same contradictions all over again. You seem to comprehend logic to a sufficient degree, so either you are suffering from cognitive dissonance or are perpetrating fraud.

Colin Phillips December 2, 2010 at 2:13 am

You make it sound as though, in an IP-free world, in order to make a profit, innovators would need to, well, innovate. Can’t have that!
If your business model rests on the assumption that there will always be some force out there, stopping people with an idea similar to yours from doing what they want to do, then maybe your business is not worthwhile?

Dave Narby December 2, 2010 at 1:12 pm

No.

You only have the patent advantage for the duration of the patent.

Everyone seems to conveniently ignore the fact that IP expires!

And please, don’t bring up Disney. Abuse of IP law is no more an excuse to eliminate IP than abuse of tort law is an excuse to eliminate personal liability.

Stephan Kinsella December 2, 2010 at 1:24 pm

RE IP expiring: which shows it’s not a natural right. And that you guys don’t have the courage of your convictions. Advocate perpetual terms, and see the world die.

Robert December 2, 2010 at 1:31 pm

So if we passed a law that said all property claims expire every seven years, or expire on the owner’s death, would you conclude that property in general is not a natural right?It doesn’t seem as though you can conclude anything about the nature of natural rights by the nature of our legal code.

EDIT: Sorry, I didn’t read closely enough, we seem to be making the same point; neither IP nor “property” are absolute natural rights, rather, they are limited rights which balance several needs.

Dave Narby December 2, 2010 at 3:23 pm

“EDIT: Sorry, I didn’t read closely enough, we seem to be making the same point; neither IP nor “property” are absolute natural rights, rather, they are limited rights which balance several needs.”

No, you read him right. He decides what is a natural right – or not.

Among the many things Kinsella conveniently ignores is that *all property*, and subsequent rights, either has an expiration date or a means to end one’s posession.

With respect to real estate, fail to keep up your taxes and the state seizes it. With respect to other material things, they eventually wear out or are destroyed by accident.

Since IP would have an infinite lifespan, it makes sense from a societal view to give IP rights a limited lifespan.

Edgaras December 2, 2010 at 5:13 am

better voluntary donations than forced donations, don’t you think, Dave? I know, some people still believe that violence is efficient and so on.. But if that’s the case, no one can change your mind on anything.

Dave Narby December 2, 2010 at 8:35 am

Forced donations? Where?

Edgaras December 2, 2010 at 9:49 am

The state granted monopolies are forced donations – it is extracted from people via taxes. Only this I had in mind. And enforcing patents and other IP crap is very expensive.

That’s why I think, that it is better to donate voluntary than to use force.

Dave Narby December 2, 2010 at 10:05 am

Under a functioning IP system, the state only grants IP rights when IP is produced. So it is not a ‘monopoly’.

When someone creates an invention, e.g. a new invention called the ‘cell phone’, you can buy it or instead continue to use other means to communicate, it’s your choice. There’s no force involved with respect to the consumer.

The fact that enforcing patents and IP is expensive indicates the system needs reform from IP abuse. …And the fact that you call IP “crap” is very revealing.

nate-m December 2, 2010 at 11:00 am

Under a functioning IP system, the state only grants IP rights when IP is produced. So it is not a ‘monopoly’.

It’s kinda up to you to prove this.

Because how it works now is absolutely monopoly. Patents, for example, work by you filing paper work and paying the government to give you a monopoly over a idea or concept. Then you can use your monopoly right to go out and sue people that violate your monopoly. It does not matter if they did it on purpose or by accident… It is simply your right at that point to control the activities and products of anybody that infringes on the patent. The effect is completely universal and immediate.

When someone creates an invention, e.g. a new invention called the ‘cell phone’, you can buy it or instead continue to use other means to communicate, it’s your choice. There’s no force involved with respect to the consumer.

That’s a laugh. Of course there is.

Dave Narby December 2, 2010 at 1:06 pm

” ‘Under a functioning IP system, the state only grants IP rights when IP is produced. So it is not a ‘monopoly’. ‘

It’s kinda up to you to prove this.”

No, it’s about definitions. A monopoly is significantly different from private property. A bicycle and a Saturn V are both vehicles, but there is considerable difference between them. Calling IP a monopoly is engaging in the “guilt by association” fallacy.

” ‘When someone creates an invention, e.g. a new invention called the ‘cell phone’, you can buy it or instead continue to use other means to communicate, it’s your choice. There’s no force involved with respect to the consumer.’

That’s a laugh. Of course there is. ”

In this example, is the state threatening the consumer with incarceration for not using a cell phone instead of say, soup cans & string? You either misunderstand, or you are hand-waving.

Robert December 2, 2010 at 1:38 pm

If enforcing IP rights is a “forced donation” wouldn’t the same concerns apply to enforcing any other claim of property rights? It costs money to protect property rights of whatever kind.

Dave Narby December 2, 2010 at 3:28 pm

Exactly right.

If your stuff gets stolen, who do you call to try and get it back? Who pays their salary?

If you buy real estate, who do you look to enforce the borders of your plot? Or the zoning laws of the neighborhood you bought it in?

The anti-IP crowd here chronically ignores the fact that without the state, your property rights are reduced to whatever you are capable of personally defending.

Peter Surda December 3, 2010 at 4:22 am

Enforcing IP requires violating physical property rights, whereas enforcing physical property rights does no require violating physical property rights (although they sometimes coincide, for example for utilitarian purposes, there is no apriori need for them).

The problem is that a simple logical error, attempting to reconcile two contradictory requirements. Having IP requires giving up of physical property rights in the proportionate amount. IP proponents on this site want to have both.

Andras December 3, 2010 at 5:25 pm

Peter:”IP proponents on this site want to have both.”

Correctly, IP proponents on this site want to respect both!

Peter Surda December 4, 2010 at 4:38 am

I wonder if you are familiar with the principle of explosion?

Andras December 4, 2010 at 12:23 pm

I’m a chemist.

Peter Surda December 5, 2010 at 6:46 am

Since I don’t think you suddenly grew a sense of humour, I guess the answer is “no”.

Comments on this entry are closed.

Previous post:

Next post: