1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar
Source link: http://archive.mises.org/17470/mises-on-ip/

Mises on IP

June 29, 2011 by

Ludwig von Mises writes in Human Action on the nature of copyrights and patents:

If there are neither copyrights nor patents, the inventors and authors are in the position of an entrepreneur. They have a temporary advantage as against other people. As they start sooner in utilizing their invention or their manuscript themselves or in making it available for use to other people (manufacturers or publishers), they have the chance to earn profits in the time interval until everybody can likewise utilize it. As soon as the invention or the content of the book are publicly known, they become “free goods” and the inventor or author has only his glory. (p. 657, Scholar’s Edition)

The analysis is as clear and sound as anything else Mises ever wrote, and the implications are obvious. That the “digital” information economy provides the means to easily make and distribute copies does not change anything; in fact, the faster pace of the market affects all industries and products (however at varying degrees).

One might wonder what could possibly be wrong with being an entrepreneur in the market. The answer is: Nothing. Unless you already enjoy a politically enforced privilege, of course, because then you would prefer and push to keep it. That is the nature of privilege, after all.

{ 27 comments }

anon June 29, 2011 at 7:38 am

This effort reminds me of the effort of religious nutcases looking in their holy books trying to find answers to today’s questions.

Per Bylund June 29, 2011 at 8:16 am

How so, “anon”? I cannot even see the resemblance. Mises comments on the nature of copyrights and patents – and that without them authors and inventors would be “in the position of an entrepreneur.” And he continues to make the argument more explicitly, and discusses the economics of the issue. I find it quite insightful.

Granted, the application of Mises’s reasoning on modern digital media is mine. But I sincerely doubt Mises would consider such products different in principle from other products so that they would call for a different economic analysis (that would be Krugman-talk, not Mises-talk). The only one making pseudo-religious claims here would be you, anon, in that you somehow find Mises’s economic analysis of copyrights and patents inapplicable on certain types of products (you don’t provide an argument why or when this is so, however). Or could it be that your view is that Mises’s thinking is temporally bound and therefore it was applicable only on the market as it was when Mises was alive? So Misesian analysis would be applicable on Volvo 164 (produced 1968-1975) but not on Volvo 200 series (produced 1974-1993)?

I find Mises’s statement on the economic consequences of copyrights and patents quite enlightening and economically correct. And he makes the same claim in several places in Human Action; I suggest you read it if you wish to criticize its content.

Shay June 29, 2011 at 10:49 pm

You need to distinguish between finding an answer based merely on authority (as some are in old religious books) and one based on an argument which the listener can evaluate for himself. This is of the latter kind, and thus its age is irrelevant. This is why we can read wisdom from some philosophers of thousands of years ago and it is still as relevant and understandable today as it was then.

scineram June 29, 2011 at 9:29 am

I agree the implications are obvious. In the digital age that profit opportunity window is rapidly closing, therefore the entrepreneurs have much less incentive to create those goods.

Andrew June 29, 2011 at 9:37 am

It may shrink in time but not necessarily in scope, e.g. with subscription models enabling a large customer base to be served instantly and simultaneously.

Matthew Swaringen June 29, 2011 at 1:35 pm

Yeah, that’s why we have even higher budgets for films and games today than 10 years ago.

coturnix19 June 29, 2011 at 3:01 pm

No, that’s because of inflation.

DixieFlatline June 29, 2011 at 6:11 pm

I agree the implications are obvious. In the digital age that profit opportunity window is rapidly closing, therefore the entrepreneurs have much less incentive to create those goods.

Right, because as the ability to share information increases, there are less digital goods being created each day … DERP DERP DERP HURRRR HURRR HURRRR

scineram July 2, 2011 at 12:25 pm

Thanks to all for pointing out the current state of the entertainment market while the Mises quote starts with “If there are neither copyrights nor patents”.

Shay June 29, 2011 at 10:51 pm

But likewise, in this digital age the authors have many more opportunities for low-cost customization and constant changes to the material, based on feedback from their audience. It goes both ways.

Wildberry June 29, 2011 at 11:01 am

Unless you already enjoy a politically enforced privilege, of course, because then you would prefer and push to keep it. That is the nature of privilege, after all.

Yes, say the right to own private property. I want to keep that. That is the nature of privilege, after all.

On the same page you quote from, Mises says this:

“It is unlikely that people would undertake the laborious task of writing such publications if everyone were free to reproduce them. This is still more manifest in the field of technological invention and discovery.”

Andras June 29, 2011 at 12:42 pm

Sorry Wildberry, the second part of the von Mises quote did not fit the agenda.
Please, move along, nothing to see here!

Per L Bylund June 29, 2011 at 1:22 pm

Wildberry, those statements are very different. The one I quoted was Mises’s economic analysis, where he basically concludes that economically copyrights and patents are protecting monopoly privileges and that without them these monopoly-holders would be entrepreneurs (like everybody else). The second statement, the one you quote, is Mises’s guess of what might be the result of government not granting such privileges – this is a policy prediction.

My post was primarily on the economics of IP (which I tried to make more interesting through adding a kind of sweeping comment on the nature of privilege). This is, after all, the Mises Economics Blog. I let others make normative conclusions (including policy suggestions) based on the economic issue.

Stephan Kinsella June 29, 2011 at 9:27 pm

Remember, too, Mises and Hayek wrote in a pre-Internet age. The cases they point out as being difficult to imagine happening without copyright–laborious things like encyclopoedia–if they had known of Wikipedia who could imagine they would not revise their predictions here?

Hayek explicitly said:

it is not obvious that such forced scarcity is the most effective way to stimulate the human creative process. I doubt whether there exists a single great work of literature which we would not possess had the author been unable to obtain an exclusive copyright for it; it seems to me that the case for copyright must rest almost entirely on the circumstance that such exceedingly useful works as encyclopaedias, dictionaries, textbooks and other works of reference could not be produced if, once they existed, they could freely be reproduced.

http://blog.mises.org/9247/hayek-on-patents-and-copyrights/

In fact as Salerno notes, Hayek thought copyright stimulated the wrong kind of production – http://blog.mises.org/17228/hayek-contra-copyright-laws/

Mises also recognized that all creative work and invention is derivative http://blog.mises.org/13202/misesian-vs-marxian-vs-ip-views-of-innovation/

Mises also recognized that creators do not create b/c of articifical stimuli provided by IP: “The problem involved has nothing to do with the activities of the creative genius. These pioneers and originators of things unheard of do not produce and work in the sense in which these terms are employed in dealing with the affairs of other people. They do not let themselves be influenced by the response their work meets on the part of their contemporaries. They do not wait for encouragement.”

He thinks that some things that might go away without copyright, we should not bemoan: “We may disregard the problem of second-rate authors of poems, fiction, and plays and second-rate composers and need not inquire whether it would be a serious disadvantage for mankind to lack the products of their efforts”

He does think some laborious things like encyclopedia would be unlikely absent copyright, but as noted above, this was pre-Wikipedia.

He aslo explicitly notes IP is controversial: “Patents and copyrights are results of the legal evolution of the last centuries. Their place in the traditional body of property rights is still controversial.” And he explictily says he takes no stance: “It is beyond the scope of catallactics to enter into an examination of the arguments brought forward for and against the institution of copyrights and patents.”

Wildberry July 5, 2011 at 7:01 pm

@Stephan Kinsella June 29, 2011 at 9:27 pm
I’ve been meaning to get to this, but you and Peter have kept me busy on the servitude thread.

Remember, too, Mises and Hayek wrote in a pre-Internet age. The cases they point out as being difficult to imagine happening without copyright–laborious things like encyclopoedia–if they had known of Wikipedia who could imagine they would not revise their predictions here?

Are you saying that the emergence of technologies transforms what was once a legitimate right into a non-right?

So, if technology emerges which makes stealing a car easier, you are saying that this might be sufficient to revise the “wrongness” of car theft?

The “laborious things” you seem to be thinking of, is a capital investment in a product. It is the investment needed to produce the first instance of a given work, whether poem or encyclopedia. Clearly the producer is the rightful owner of that product. What property theory requires that that property right magically vanish the moment he lets anyone actually read it buy a copy to take home?

Hayek explicitly said:

it is not obvious that such forced scarcity is the most effective way to stimulate the human creative process. I doubt whether there exists a single great work of literature which we would not possess had the author been unable to obtain an exclusive copyright for it; it seems to me that the case for copyright must rest almost entirely on the circumstance that such exceedingly useful works as encyclopaedias, dictionaries, textbooks and other works of reference could not be produced if, once they existed, they could freely be reproduced.

http://blog.mises.org/9247/hayek-on-patents-and-copyrights/

Hayek appears to be making a distinction between literary works of art, to which Mises refers to as the work of the “creative genius” [ Human Action, Scholar’s Edition; p. 657]

The problem involved has nothing to do with the activities of the creative genius. These pioneers and originators of things unheard of do not produce and work in the sense in which these terms are employed in dealing with the affairs of other people. They do not let themselves be influenced by the response their work meets on the part of their contemporaries. They do not wait for encouragement.

This merely reflects the shared view of Mises and Hayek, in my opinion, that the strongest case for IP, specifically copyrights, was to be made concerning works other than pure art, which may be produced for non-commercial reasons. However those works for which there could be no other motivation for their production, the observation regarding producing for external markets, holds true.

In fact as Salerno notes, Hayek thought copyright stimulated the wrong kind of production – http://blog.mises.org/17228/hayek-contra-copyright-laws/

I read Salerno’s article and the Hayek reference in context. I am not at all convinced this was an anti-copyright statement, but rather a view that copyrights may well contribute to the ability of dissenting views to reach the daylight of public consumption. He seems to be speculating on the control that the demagogues would have to limit the dissemination of dissent, and how that is influenced by copyright law. In any case, it is far from a foregone conclusion that Hayek was against copyrights to any degree that rivals Kinsella’s views.

Mises also recognized that all creative work and invention is derivative http://blog.mises.org/13202/misesian-vs-marxian-vs-ip-views-of-innovation/

The entire quote selected by Mr. Tucker includes this:

All this does not in the least affect the truth that each step forward was made by an individual and not by some mythical impersonal agency. It does not detract from the contributions of Maxwell, Hertz, and Marconi to admit that they could be made only because others had previously made other contributions

So, being able to trace any innovation to some earlier work does not diminish the fact that some person did something to advance the cause, to the benefit of all those who enjoyed some advantage previously unavailable.

To argue otherwise is equivalent to saying that no one every can take credit for having written a novel, since obviously the alphabet was already invented.

Mises also recognized that creators do not create b/c of articifical stimuli provided by IP: “The problem involved has nothing to do with the activities of the creative genius. These pioneers and originators of things unheard of do not produce and work in the sense in which these terms are employed in dealing with the affairs of other people. They do not let themselves be influenced by the response their work meets on the part of their contemporaries. They do not wait for encouragement.”

Yes, and he goes on to say this is not germane to his point. Those works which clearly have no purpose other than economic (technical handbooks, for example) would have been produced for external economies if they could be freely reproduced.

He thinks that some things that might go away without copyright, we should not bemoan: “We may disregard the problem of second-rate authors of poems, fiction, and plays and second-rate composers and need not inquire whether it would be a serious disadvantage for mankind to lack the products of their efforts”

He is simply saying here that an author that has a monopoly on a particular book does not have a monopoly on all books. If you think a poet’s work stinks, no need to buy his book. That is how the consumer reigns supreme; authors who create demand for their products prosper and those who don’t, starve or get a day job.

He does think some laborious things like encyclopedia would be unlikely absent copyright, but as noted above, this was pre-Wikipedia.

Even Wikipedia takes some capital to generate, which by the way, is made available under the terms of the Creative Commons copyright license. Notice the owners still claim copyrights?

He aslo explicitly notes IP is controversial: “Patents and copyrights are results of the legal evolution of the last centuries. Their place in the traditional body of property rights is still controversial.” And he explictily says he takes no stance: “It is beyond the scope of catallactics to enter into an examination of the arguments brought forward for and against the institution of copyrights and patents.”

He takes no stance other than the one he has taken. However, he restricts himself to the scope of his topic of catallactics, and merely gives us all a big clue that if you are going to argue about the controversy, you must deal with the external economy issue. And he gives us the direction and tools for pursuing that.

It is not sufficient to just claim that Mises was wrong about IP, or that he resolves the controversies surrounding it by ignoring the very economics framework that is his opus. He lays out the two aspects of the problem; ideas and recipes are inexhaustible, yet producers cannot be expected to produce for external economies. Therein lies the dilemma.

Certainly his words cannot be dismissed so casually, especially on a site named Mises.org.

Wildberry July 5, 2011 at 7:02 pm

There is a bug in the edit function. It throws in extra blockquotes adn doesn’t let you edit.

Sorry.

Peter Surda July 5, 2011 at 7:49 pm

Wildberry,

Are you saying that the emergence of technologies transforms what was once a legitimate right into a non-right?

No, he’s saying that the emergence of technologies affects peoples’ imagination. But since you lack a brain in the first place, you’re unaffected.

So, if technology emerges which makes stealing a car easier, you are saying that this might be sufficient to revise the “wrongness” of car theft?

There is no right not to have your property copied in the first place.

Make up some new lies, the old ones are boring.

Matthew Swaringen June 29, 2011 at 1:34 pm

While everyone here respects Mises, his conclusion was wrong, proved by the fact places like this exist, by open source software, etc. On the area of patents and science you need only look to Terence Kealey on that subject.

The most someone may be able to say is that some high budget movies and games might not be possible without IP, but even that’s unlikely.

Wildberry June 29, 2011 at 2:43 pm

@ Matthew Swaringen June 29, 2011 at 1:34 pm

First, is it an argument to claims that because IP does not protect every written word, it should not protect anything?

Second, these things you cite happen to co-exist with IP. If IP was such a freedom-buster, as you would claim, then how is it the things you reference manage to exist at all?

The section of Mises that Per quotes argues directly against what you just said. Mises is not wrong, and if I was going to have the gumption to dismiss his work for some reason, I would at least feel somewhat compelled to offer some kind of specific rebuttal.

Wildberry June 29, 2011 at 2:31 pm

@ Per L Bylund June 29, 2011 at 1:22 pm

If you want to quote Mises on economics, I suggest you quote him in some kind of context.

You missed his discussion on monopoly, and why monopoly is normal and all around us and not something that is contrary to the operation of a free market; all private property rights secure a monopoly to that property. This understanding is not the same connotation of monopoly as that of a theoretical market monopoly, and he warns against conflating those different connotations.

Second, you have to address his conclusion, which is that without secured property rights in IP, producers of intellectual products are producing for external economies.

And despite Mr. Kinsella’s praise to you here, he has never addressed this obvious contradiction between his position on IP and that of Mises.

And despite your admonition to me that this is an economic site based on the work of Mises, IP is at some level an economic question that intersects with the principles of private property, privately owned means of production, and free market operations. This is why, no doubt, Mises found it necessary and/or important to mention IP at all in his most famous treatise on economics.

You selectively quote him out of context, use his words to support a position that is contrary to the one he takes, and then deny the obvious validity of an objection.

Andras captured all of this in his one-line comment. You pulled something from Mises out of context and tried to make it support your party line. I object.

sweatervest June 29, 2011 at 2:35 pm

Mises’ theory on monopolies and monopoly prices was also systematically refuted in Rothbard’s Man, Economy and State.

Wildberry June 29, 2011 at 7:32 pm

Mayabe you’re right. I’d be interested in a reference.

newson August 3, 2011 at 12:27 am

see armentano for why rothbard was right and mises wrong on monopoly:
http://mises.org/etexts/armentanomonopoly.pdf

Wildberry August 3, 2011 at 10:03 am

Newson;

I can’t get into this in detail right now, but for my purposes I fail to see the conflict.

Rothbard simply dismisses Mises’ first connotation of “Property monopolyas “absurd” but fails to acknowledge that he is really calling private property rights “absurd”.

Rothbard’s second definitin is one of the ways Mises said that resource monopoly can be attained, and is the just another basis for Rothbard to line up against the State.

That leave the concept of monopoly pricing, which both he and Mises agree cannot be maintained within a competitive market, since even resource monopoly results in substituting resources, i.e. wheat for corn.

As Armentano clearly states, Rothbard obviosuly prefers the “State” issue, and as such is merely a corollary of “We have IP because we have the State” argument.

Monopoly in the absence of State grant of privilege is not really much of a concern for free markets. To the extent the State intervenes, it is not free.

That leaves us exactly where I started; State granted “monopoly” in IP, specifically copyrights, is simply state-enforced private property monopoly, adn to make it into anythng else is at attempt to argue for Ancap by classifying IP as a monopoly of the state variety.

I argue that it is not necessary to pre-determine the method of coerscion employed to enforce private property rights, adn that IP is simply an example of private property monopoly.

The more I learn about Rothbard, the more it seems that he contributed very little original thought except, perhaps, in elaborating on Ancap. I don’t depend on that arguement to justify IP.

Shay June 29, 2011 at 10:58 pm

As far as I see it, property is a basic aspect of physics, not humans. If humans are using matter outside themselves in any way, then it’s not a question of whether they own it, just one of how they decide who gets to use it. They must do so, since matter has physical limitations; if it didn’t, everyone could use all matter freely and there would be no need even for the concept of property in the first place. Thus, the issues involved here are irrelevant for ideas, so you bringing up physical property is just a distraction, as far as I see it.

Virginia Llorca June 29, 2011 at 11:37 pm

@Shay. You are trying to use the concept of ‘physical property’ as an abstract. I don’t feel comfortable with that construct.

Stephan Kinsella June 29, 2011 at 11:05 am

Great post. I have other Mises quotes on IP in my post Mises on Intellectual Property.

Comments on this entry are closed.

Previous post:

Next post: