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Source link: http://archive.mises.org/9288/the-universals-of-ip-theorizing/

The Universals of IP Theorizing

January 23, 2009 by

Against Intellectual Monopoly might have begun with a story about the failed attempts to stop illegal downloads or the wicked crackdowns on teens for file sharing. Instead the authors take us back to the Industrial Revolution to explode the myth of the supposedly great innovator James Watt and his steam engine.

Why? Because, as the introduction points out, this is a book of economics. If you have something to add to the science, it can’t just apply to now, or last year, in this place, or just that place. Economics is a universal science. Its laws and lessons apply to all times and places. For this reason, a theoretical breakthrough is a massive event. It means work for generations of scholars: revising history, fine-tuning other aspects of theory, applying it to different fields.

This is one reason that this book is so important. And sensing that they are taking on more than just the problem of digital downloads, they put this ancient history up front. They take the first crack at revisionist history with regard to a famous patent.

They show that most of Watt’s energies were spent lobbying for and defending a government patent on a technology that was quickly surpassed but could not come to market thanks to his rent-seeking behavior. Nor was this patent somehow necessary for his economically useful behavior. It wasn’t until after the patent expired that steam engine technology really took off, but by that time the Industrial Revolution gave up 10-15 years of what might have otherwise been economic progress.

There we have it: we are put on notice that this book is not merely about the digital age or life after the internet, written by a couple of geeks. No, this is a revisionist treatment of the whole subject that applies not only now but in the whole modern history of “intellectual property,” which they insist on calling “intellectual monopoly.”

Next they stake out their unique position, which is neither that patent and copyright law has gone too far nor that it hasn’t gone far enough. They take a third position that only a few dare take: the stuff needs to be abolished altogether. Their grounds aren’t nearly as complicated as one might as first think.

Grant that “everyone wants a monopoly. No one wants to compete against his own customers, or against imitators. Currently patents and copyrights grant producers of certain ideas a monopoly.”

Next concede a point that everyone brings up first: “Certainly few people do something in exchange for nothing. Creators of new goods are not different from producers of old ones: they want to be compensated for their effort.”

Now the core of the argument: “it is a long and dangerous jump from the assertion that innovators deserve compensation for their efforts to the conclusion that patents and copyrights, that is monopoly, are the best or the only way of providing that reward…. creators’ property rights can be well protected in the absence of intellectual property, and that the latter does not increase either innovation or creation. They are an unnecessary evil.”

They continue to spell out precisely what they mean. They favor the property rights of producers. The property rights of innovators should be protected, and so should the property rights of those who have a copy of the idea of the creator. The first property right encourages innovation. The second property right encourages diffusion, adoption, and improvement of innovation.

The question is whether creators should have a right to dictate how purchasers use a creation. To say they should amounts to a claim not of property rights but of “intellectual property.” It confers a privilege and restricts third parties in what they can do with property. It is a grant of monopoly privilege. Monopolies are not friends of innovation in any area of life. They don’t go into detail here, but we know this by looking at the Post Office or the public schools or the utility companies. All the sectors controlled by monopolists are characterized high prices, low innovation, and stagnation generally.

How odd it is that we believe otherwise–this one kind of monopoly is something we can’t live without!–with intellectual property!

The authors point out that the supposed incentive to create is a double-edged sword. Someone pays the bill. It’s not as if the creator benefits and nothing else happens. For example, they cite the case of movie that costs $218 cost $400,000 in music rights. This is a serious social cost. It is largely an unseen cost too. Think of the movies that are not made, the profits in publishing that are never seen, the inventions that are delayed or never come to market, the alternative use of the billions and billions that are spent by consumers on patented drugs.

The introduction also deals with the U.S. Constitution’s endorsement of copyright and trademark. They say that it is outmoded but no more than that. For my own part, I’m somewhat curious about this. Many parts of the Constitution are fundamentally anti-monarchical (only republican governments permitted in the states, e.g.). The history of patent legislation in England prompts me to wonder if the purpose of this clause is to say that government will not own and dispense mercantalist privileges; rather individuals alone will possess such rights. It was supposed to be a point against kingly privilege; still misguided, to be sure, but one can make a bit more sense of it in this case.

The first chapter is highly provocative and puts the reader on notice that a wild ride is coming. They authors don’t disappoint.

People sometimes ask about research projects. What the authors have done with the Watt case could be done for a thousand other cases. There is so much work to do, and so much rethinking to do.

{ 30 comments }

ktibuk January 23, 2009 at 12:11 pm

“Against Intellectual Monopoly might have begun with a story about the failed attempts to stop illegal downloads or the wicked crackdowns on teens for file sharing. Instead the authors take us back to the Industrial Revolution to explode the myth of the supposedly great innovator James Watt and his steam engine.”

I havent read the book, nor do I plan to because I have been exposed to enough socialists ramblings, but if I have to guess authors target patents to represent all IP because it is an easy target no libertarian defends.

Patent laws have bigger problems than IP being property or not. Patent laws are judgments without trial on the claim that any independent discovery is impossible, which is absurd.

“Why? Because, as the introduction points out, this is a book of economics. If you have something to add to the science, it can’t just apply to now, or last year, in this place, or just that place. Economics is a universal science. Its laws and lessons apply to all times and places. ”

This is not actually “the why” but it gives a good opportunoty to ask the age old question.

If these fine economists can tell us how they plan to deal with the calculation problem?

How much IP will be produced? How many songs, how many movies, how many pieces of software? How the scarce resource called the producers labor and time will be allocated? Will they be employed towards creating music more, or movies or more novels and poems? How will we ever know?

Or do they argue that any thing that is the subject of IP, like movies, songs, software, etc will not be exchanged but created by individuals only for themselves.

Mises showed that socialism is only possible in primitive societies where division of labor is not possible. A society where there are no writers, composers, actors , software engineers but only people who write their own novels, compose their own music, code their own software

He was right.

Lars January 23, 2009 at 12:16 pm

“grant producers of certain ideas …”

The Watt invention was not merely an idea. He had proven that his ideas worked, by building, testing, thinking, building, testing, thinking, and so on. Some inventions have been produced by very bright people, devoting years or tens of years of their life pursuing a solution to a technical problem. Is it unrealistic to think that a few inventions, made 20 or 50 or 100 years ago, would not yet, up to this day, be known, were it not for the person that found the solution? An invention is a working recipy, hitherto unknown to mankind. A patent can be granted for only 20 years. A great recipy, when applied, has can advance mankind a 100 years.

Mike January 23, 2009 at 12:22 pm

“How much IP will be produced? How many songs, how many movies, how many pieces of software? How the scarce resource called the producers labor and time will be allocated? Will they be employed towards creating music more, or movies or more novels and poems? How will we ever know?

Or do they argue that any thing that is the subject of IP, like movies, songs, software, etc will not be exchanged but created by individuals only for themselves.

Mises showed that socialism is only possible in primitive societies where division of labor is not possible. A society where there are no writers, composers, actors , software engineers but only people who write their own novels, compose their own music, code their own software

He was right. ”

What on earth are you talking about? Abolishing IP requires an answer to the calculation problem? Here’s your answer: resources will be allocated according to market demands. Now grow up.

ktibuk January 23, 2009 at 12:56 pm

“What on earth are you talking about? ”

I am talking about economics. But it is not your fault you are ignorant of it. Unfortunately this blog has more IP Socialism posts than economics posts. But you have to try to learn Mike. Don’t give up. Economics is important. You may learn a lot. Like the one point below.

“resources will be allocated according to market demands.”

Resources are allocated by prices that form in the market after exchanges of private property. If there is no private property, there are no exchanges. If there are no exchanges there are no consumer good prices. When there is no consumer goods prices, there will not be factor prices.

This is as much help as I can extend at this point. Study on.

ktibuk January 23, 2009 at 1:02 pm

“What on earth are you talking about? ”

I am talking about economics. But it is not your fault you are ignorant of it. Unfortunately this blog has more IP Socialism posts than economics posts. But you have to try to learn Mike. Don’t give up. Economics is important. You may learn a lot. Like the one point below.

“resources will be allocated according to market demands.”

Resources are allocated by prices that form in the market after exchanges of private property. If there is no private property, there are no exchanges. If there are no exchanges there are no consumer good prices. When there is no consumer goods prices, there will not be factor prices.

This is as much help as I can extend at this point. Study on.

Mike January 23, 2009 at 1:05 pm

kthanxbai

Mike Masnick January 23, 2009 at 4:05 pm

“Resources are allocated by prices that form in the market after exchanges of private property. If there is no private property, there are no exchanges.”

Shame that someone who claims to understand economics is so woefully wrong.

First off, yes, private property is a key element of a marketplace, but you have to first understand the purpose of private property. This is rather important, and often gets lost in the shuffle. The purpose is to allow for the efficient allocation of resources.

However, when a good is infinitely available, there is no question of the efficient allocation of that resource, because efficiency is easy: anyone who wants a *copy* can get it. This is not socialism, as you imply. It’s pure free market capitalism. Your mistake is confusing the “copy” with the original good. It’s a common mistake.

Thus, it makes little sense at all to apply property rights to infinitely available goods. In that case, all you are actually doing is making allocation INEFFICIENT by putting artificial and unnecessary limitations on things, and actually diminishing transactions, because the infinitely available works cannot be built upon to create new and valuable works.

So you have put the cart way before the horse here in focusing on the marketplace, rather than the efficient allocation of resources. We like markets for scarce goods because they make allocation efficient.

We can have a market for infinite goods, but since the supply is infinite, the price will get set at zero (this is just basic economics).

Now, the real reason given for IP rights is not about allocation of resources, but incentives to create (you seem to confuse these things in your comment). So, your question about “the calculation problem” is actually about incentives to create, which is separate from the issue you later brought up (the market for efficient allocation).

But, once again, here you seem to have a lack of understanding of the facts. There is tremendous evidence nearly across the board that there are significant and workable models to create plenty of new works (or new inventions) in the absence of IP protections. In fact, much of the evidence suggests that the end result would, in fact, be MORE works created, because so many creative and inventive works are actually built off of earlier works.

In other words, both creative and inventive works are an ongoing process of creation, and placing an unnecessary, inefficient and market limiting tollbooth at each stage of the process drastically slows down the incentives for creation.

So, let’s try starting again from scratch. Look at the difference between the allocation problem from the creation problem — and then look at alternative models and the research concerning how those alternative models do. Then, perhaps, you might want to tone down your false statements concerning “socialism” and maybe, just maybe, apologize to those you insulted with your own statements.

Crosbie Fitch January 23, 2009 at 6:54 pm

“If there is no private property, there are no exchanges.”

Too true. And this applies just as much to intellectual property as material property.

Let us abolish artificial monopolies such as copyright and patent, but do not trample over the natural right to privacy – whether in material or intellectual property.

I’m also bemused by the notion that if a state does not incentivise creativity that there will be none. One might as well propose that the state should incentivise breathing, for fear that the citzenry will otherwise expire through lack of will to live.

newson January 23, 2009 at 9:15 pm

so following ktibuk’s logic, the entire history of mankind, barring the recent historical past when ip came under state tutelage, was the history of ip socialism.

Andy January 23, 2009 at 10:16 pm

I have a question about attribution of works as it pertains to the use of Creative Commons licensing.

I understand that Creative Commons is much more in line with the libertarian ideal (in the Kinsella/Tucker mode). However, copyright law forms the starting point — like it or not the US Gov grants us content creators the exclusive right to our work i.e. “all rights reserved” — CC 3.0 allows the content creator to give up some rights i.e. “some rights reserved” or even in some cases to give the work over to the “public domain”.

For example, in the one CC 3.0 license, the user may “to Share — to copy, distribute and transmit the work” as well as “to Remix — to adapt the work”. One stipulation is “Attribution. You must attribute the work in the manner specified by the author or licensor (but not in any way that suggests that they endorse you or your use of the work).” Source: http://creativecommons.org/licenses/by/3.0/

So here’s the question: In the libertarian ideal, do we have a right to have our work attributed to us? Not social convention, but an actual right that can be enforced through the courts? Do we have a right to receive attribution?

Plagiarism seems to be more of an issue of fraud issue i.e. passing someone else’s work off as your own. So I can imagine others laws/rules would reinforce attribution naturally.

So is the only just IP public domain?

ktibuk January 24, 2009 at 2:59 am

Mike,

“The purpose is to allow for the efficient allocation of resources”

No it is not. Property is the natural outcome of reality. I own myself not because of some efficiency but because I do.

“However, when a good is infinitely available, there is no question of the efficient allocation of that resource, because efficiency is easy: anyone who wants a *copy* can get it.”

You don’t seem to get that the factors that go into the production of IP is not infinitely available. The creators time is scarce. If someone is composing music this means he has to forgo doing something else. If he is coding software he can not do anything else.

This isn’t an issue of incentives which you would know if you knew Misesian Economics. It is a matter of calculation. No matter how motivated the socialist man is he can not calculate how his scarce resource, time, will be allocated to produce IP.

Can I get a response from someone who knows economics, please?

If you socialize IP, what will happen to the calculation problem.

ktibuk January 24, 2009 at 3:07 am

Tucker, Kinsella, Fedako?

Calculation poblem?

Anyone?

newson January 24, 2009 at 3:55 am

you too, ktibuk, have calculation problems to solve: the value of opportunity profits that you maintain are due the creator, and which are captured by the pirates. would all those who avail themselves of a free product hand over money if enforcement were effective?

what is the positive value to the originator of the dissemination of the work performed by pirates? (i’m presupposing that fame/notoriety has some potential commercial/ psychological value).

also please explain how to quantify the extent of originality of the innovation. is it completely novel, or a minor rearrangement of existing ideas? does degree count?

Paul Lockett January 24, 2009 at 4:23 am

ktibuk: “Property is the natural outcome of reality. I own myself not because of some efficiency but because I do.”

Which is fair enough. If you have an idea in your head and you don’t want anyone else to know it, then your self-ownership should allow you to keep it to yourself.

However, if you decide to make that idea known and it subsequently becomes known to me, my right of self-ownership says that the idea is now mine to use as I see fit.

Crosbie Fitch January 24, 2009 at 4:34 am

I think Ktibuk’s arguments are more sound (and libertarian) than the ‘central planning’ oriented arguments by Mike, especially with talk of such dubious concepts as ‘infinite resources’ and their allocation.

I’d rather live in a world where the natural rights of the individual were protected by the government (that the people created for such a purpose), than in one where resources, privileges, and liberties were ‘allocated’ by a paternalistic, centrally planned totalitarian state.

However, soundness of argument is one thing, where we stand on pertinent issues may be another. In that respect I may even find greater commonality with Mike than Ktibuk.

Some of us are against the state’s unconstitutional granting of privileges in the form of copyright and patent (in the case of the US at least).

Some of us are for the dissolution of intellectual property, and do not recognise authors’ and inventors’ exclusive rights.

I’m in the former group (against monopoly), but not in the latter (I find intellectual property to be quite natural).

Crosbie Fitch January 24, 2009 at 5:05 am

Andy, Creative Commons is not a libertarian mission. It is about re-empowering the author rather than their publishing agent to determine what liberties they would like to permit their audience. It’s a set of standardised conditional licenses that supposedly enable the author to dictate how their work may be used by their audience – given the minimal permission to copy in exchange.

Thus an author can obtain free promotion by their audience whilst still prohibiting commercial exploitation, or the production of derivative works.

Creative commons is all about authorial control, and enabling the author to modulate copyright rather than having to negotiate the treatment of their audience with a large publisher, e.g. “you may publish my work, but you may not sue my audience for file-sharing”.

Unfortunately, copyright is pretty much impotent in the hands of all but the wealthiest of authors. It’s possible there is some expectation that copyright infringement could become a criminal offense and that it would be then be policed and prosecuted by the state rather than the poor copyright holder. Let’s hope not.

The closest CC has to a copyright neutralising license (akin to the GPL) is CC-ShareAlike, but that has no particular endorsement over any other CC license.

CC’s copyright enforced obligation for attribution is invidious. But then the attempt to force respect from those who share or build upon one’s work is the sort of corruption you can expect from those granted copyright’s unethical privilege over their fellows.

The only natural right concerning attribution is a right against misattribution, i.e. a right to truth (against deceit, fraud, falsehood, etc.). So, there is no right to attribution, though in some cases one could observe misattribution to be implicit by omission, through context.

CC is fully supportive of copyright. In any case, CC can only allow the licensor to restore rights that copyright suspended (the natural right to copy a specific work). The licensor cannot ‘give up’ or ‘unreserve’ any natural rights they possess, e.g. the exclusive rights to their work.

It is a perversion of the term ‘right’ for copyright holders to be considered to be giving up their rights in the process of licensing – they are (partially) restoring the public’s right that copyright suspended to privilege the author/publisher.

Joe B January 24, 2009 at 6:52 am

I don’t see the point of arguing for IP rights unless your intent is to empower a coercive state to protect them.

What other end could you be seeking? To convince everyone so that they will agree to respect your definition of rights? Good luck!

Arguing for physical property rights can also only have the same goals – either to describe the powers of a coercive state or to influence the voluntary actions of others through reason. Given the nature of this blog, I’ll assume that everyone here has the latter goal in mind.

In a free market, the difference between the two comes down to a matter of implementation. You could prevent others from using your land and physical possessions with a fence, private security, etc.

However, you can only prevent others from using your ideas by keeping them secret, unless you intend to employ a security force to police the world for any breach of your right. You would need a damn lucrative idea to make this feasible.

For both cases, you could form a voluntary legal system by which everybody agrees to respect each others defined rights. However, this would only have scope over those who voluntarily choose to act in accordance with this system. If it attempted to extend this scope to others, it would by definition be coercive. If it taxed everyone to fund this protection, it would be mercantilism.

Future ideas are scarce – they require labor, time, possibly capital to develop. This is where the calculation takes place. Someone who needs a problem solved will trade resources to someone who they think is capable of solving that problem.

Once the problem is solved, the customer has received his solution, and the innovator has received his payment. The idea is no longer scarce – neither the innovator nor his customer lose anything if a third party copies that idea.

The fact that many current business models are built around the notion that the idea continues to be scarce doesn’t magically redefine the completed idea as a scarce good. These models aren’t collapsing because technology has made the ideas less scarce; they collapse because technology is quickly revealing that they were never scarce to begin with.

ktibuk January 24, 2009 at 12:17 pm

Sorry for multiple posts, But there are so many IP posts these days I dont want this to go to obscurity.

Straw man argument is exactly what IP socialists are doing.

Notice all the posts from Kinsella and Tucker. Also notice the examples given in the book they are promoting.

They are basicly against patent laws, which have problems beyond IP being a property or not.

They build a straw man equating patents with IP, and thus try to abolish private property.

They have no intellectual courage so they can not bring up pirates copying full movies and songs as examples but only examples that doesn’t really create any problems, like ‘humming a tune while walking” or “forgetting a book on the beach”. But when libertarians bring this copying thing, they change the argument to the scarcity issue.

Which is a non issue anyways because the act of copying without the consent of the owner is aggression. And aggression is an ethics issue, unlike scarcity which is an economics issue.

Just like fraud, or theft without confronting the owner.

You have to ask the question, in which circumstances would the owner let someone copy his work, unless he gives out it freely? The answer is clear. By the threat of aggression. So we may conclude that, copying something without the actual consent of the owner is aggression. Just like fraud is actually aggression, although no real threat is used.

Also IP socialist keep claiming that the owners of IP are actually trying to coerce the copyer. Which is both absurd and unbelievable. Of course they keep bringing up patents which are actually guilty of this to confuse.

There are two person. A wrote a novel, B copied it. Would there have been a book or am act copying if A hadnt wrote the book? No. So the situation must follow the following steps as far as logic goes.

A writes the book, B aggress against A by copying the book, without A’s consent. B initiated the aggression there fore any force A may use after the fact is in fact ethical.

IP socialists always confuse property with protection of property, and they also confuse property with value. Logically protection issue must come after the homesteading. Protection issue can not precede homesteading. To claim this is logically absurd. Property is having the right to do whatever one wants with something. Robinson Crusoe owns the fish he catches, he can do whatever he wants with it. He doesn’t have to wait for Friday to come to the island, to make the fish his property. If he did he would die.

Also somethings economic value, has nothing to do with property rights. Something maybe so abundant that it may in fact be free. But “free” is about value and valuations. It is not an ethical concept thus it is not directly related to the property issue.

Some IP may leak. It is hard to control IP. It may become a free good. But even this doesn’t change the fact that the IP is the producers. This may not mean anything as far as exchange economy, but it means a lot ethically.

Even the IP socialist subconsciously knows this. They may advocate mooching of the creator by being a parasite, but when it comes to giving due to the creator they seem to not be able to go that far and deny the creators part in all of this.

Yes, Rawling created Harry Potter. You may mooch of her but at least give her her due, right? Promise it wont cost you nothing. And when you are used to taking something for nothing, giving something that doesn’t cost anything couldn’t hurt, right?

There are so many fallacies in IP socialists claims that it is hard to expose all of them on comments sections on this blog.

But if you follow this blog enough you can see the IP socialists blogging here are actually the worst enemies of their positions.

Since they don’t have a comprehensive, contradiction-free theory, the more they post the more they expose themselves. They even use all the classical socialists arguments. They analyze IP as it relates to economics but they don’t dare bring up or respond to calculation arguments. Just repeating a bunch of memorized lines.

So keep at it boys. You may be bloating the blog with this IP thing and cause people to spend their scarce time on these instead of on stuff about the worst financial crises the world has ever seen, but IP is an important issue to.

Joe B January 25, 2009 at 8:57 am

ktibuk: “Property is having the right to do whatever one wants with something.”

I agree. And theft can be defined as preventing someone from doing whatever they want with something that they own.

In the case of physical property, this could take the form of physically removing the item from the owner’s hands, coercion such as the threat of violence, or making a fraudulent exchange – thus forcing the result of their trade to differ from the action they intended.

In the case of IP “theft”, the creator is not prevented from using his idea. He may lose an opportunity to profit exclusively from the idea, but the idea itself remains intact in his head, for him to use as he pleases.

If this counts as aggression, then any new competitor entering any established market could be said to be aggressing against the existing producers, because he is likewise reducing their opportunity for future profits. He is not preventing them from producing their goods or using their posessions.

ktibuk: “…they don’t dare bring up or respond to calculation arguments.”

Since you ignored my calculation argument, I’ll expand it here.

Economic action, by definition, describes the allocation of scarce goods. Once an idea has been introduced to the world, it is not scarce. It can be reproduced ad infinitum without being consumed.

Actors other than the creator may need to expend scarce resources in order to learn this idea, but these would be allocated according to the usual economic process, at their own expense. The idea is still a future good to these actors, and thus it is still scarce from their individual frames of reference.

There is calculation implied here, by which the original creator may initially be able to profit by teaching or implementing his idea. However, once the idea has proliferated this exclusive opportunity will diminish. This is the same process by which an entrepreneur profits from a new market but eventually loses exclusivity as new competitors act on the opportunity that he has revealed.

Calculation happens before the idea comes to fruition. A creator who chooses to expend scarce resources to develop an idea does so with an expectation that he will eventually profit from the application of this idea. With the exception of prosumption, this means that he expects others to pay him for having produced the idea.

So how does he calculate the amount of resources that are worth expending in this effort? He must consider the risk that his idea will proliferate once it is released, meaning that the opportunity to profit by applying it will diminish over time. Knowing this, he could choose to expend further resources to protect this idea as a trade secret. In certain cases, he could also manufacture a large stock of the physical good derived from his idea, which could give him an advantage in being first to market. He may also decide that this risk is too great and abandon the project, instead allocating his resources elsewhere.

In order to mitigate this risk, he could arrange a contract by which he will be paid upon having delivered this idea. This could take many forms, i.e. a commissioned work of art, or an agreed hourly development wage.

There is plenty of calculation happening here – you’re just confused in thinking that it would continue after the idea has proliferated. It would not continue – no further scarce resources will be allocated towards the development of this idea, so calculation no longer has any meaning.

Many modern business models are confused about this as well, and these are the ones that are failing. They are simply miscalculating the profit opportunities and thus misallocating their development resources.

In the case of blatant plagiarism that you’ve described, B may be committing fraud by claiming that he has conceived of the book that A actually wrote. However, he is not committing it against A, he is committing it against the people who paid him for the book because they thought they were getting something that came from B’s mind.

If buyers discover that A actually wrote the book, they could demand their money back from B citing fraud, but A has no claim to this money. Some sympathetic or appreciative buyers may send their returned money to A, but this is done voluntarily based on their own individual values. They have no obligation to pay A just as they had no obligation to buy the book from B in the first place. Caveat emptor. If you desire authenticity, do your homework before buying.

In order to avoid committing fraud, B could sell the book and state that A is the author. In this case, the buyers are getting exactly what they are paying for. The fact that B is profiting instead of A is unfortunate for A, but he should have calculated this risk prior to expending resources to write and publish the book. B has not prevented A from selling it. A could mount a campaign to assert that his is the authentic version, and buyers who value authenticity will purchase A’s version rather than B’s.

Kinsella makes a similar argument regarding trademarks (“Against Intellectual Property”, p. 58).

Scarcity, value, and property are all necessarily intertwined. They are economic concepts from which Libertarian ethics is derived. Value is dependent upon scarcity, and property is dependent upon value – if nobody valued physical goods, they would not claim them as property.

Property rights are defined to prevent conflicts over these valued scarce goods. Violation of these rights is considered ethically wrong because it distorts the voluntary process of human action by preventing actors from using their property according to their own values.

Kinsella also discusses the importance of homesteading for scarce resources as a means of preventing conflict over their allocation (p.30-32). Since ideas are not scarce, there can be no conflict over their allocation. My use does not exclude your use. Therefore there is no conflict for homesteading to prevent.

Scarcity is not a “non-issue” – it is literally the defining characteristic of economics. A system of ethics that is based on economics and personal liberty must seek to allow any action that doesn’t contradict the economic process. IP rights restrict individual liberties while contradicting physical property rights and economic calculation, since they force scarcity where none truly exists.

ktibuk January 25, 2009 at 9:18 am

Joe B,

Thanks for the response.

“In the case of IP “theft”, the creator is not prevented from using his idea. He may lose an opportunity to profit exclusively from the idea, but the idea itself remains intact in his head, for him to use as he pleases.

If this counts as aggression, then any new competitor entering any established market could be said to be aggressing against the existing producers, because he is likewise reducing their opportunity for future profits. ”

I will not get into semantics. Theft or not. But it is in fact coercion. If A hadn’t created the IP, IP wouldnt exist. If B obtains IP there are two possibilities. Either he created it himself, then no problem, or he copied. If he copied there are two possibilities. Either A consented, or he didn’t. There is only one way that B copies without the consent of A and that is coercion. This is no different than B putting a gun into As hand and threaten him in order to let him copy the original.

“Actors other than the creator may need to expend scarce resources in order to learn this idea, but these would be allocated according to the usual economic process, at their own expense.”

I see you are also not familiar with economics. The problem is the economic process you seem to think magically happens. Economics teach you how this process happens.

I will repeat. If there is no private property, there is no exchange. If there is no exchange there are no prices. If there are no prices, there are no factor prices. If there are no factor prices, factors can not be allocated to serve the market.

“Scarcity, value, and property are all necessarily intertwined. They are economic concepts from which Libertarian ethics is derived. Value is dependent upon scarcity, and property is dependent upon value – if nobody valued physical goods, they would not claim them as property.”

What if something is not valued by any other but the owner, thus its value is zero. Does it lose its status as property?

Can Robinson Crusoe not own anything, before Friday comes to the island?

Paul Lockett January 25, 2009 at 9:44 am

ktibuk: “But if you follow this blog enough you can see the IP socialists blogging here are actually the worst enemies of their positions. Since they don’t have a comprehensive, contradiction-free theory, the more they post the more they expose themselves.”

Try looking again at your own postings. You claim that copying an idea without the express consent of the originator is aggression and makes the copier a parasite, yet every time you post, you do so using the English language, without first seeking the consent of the people who created the words you are using.

The very act of expressing your belief contradicts it.

Mike Masnick January 26, 2009 at 4:20 am

ktibuk:

“No it is not. Property is the natural outcome of reality. I own myself not because of some efficiency but because I do.”

This is simply not true. But, let’s have some fun and grant your premise. You are still wrong! If you own a product, and I make a *copy* then I now own the COPY, not the original. Thus, I have taken no property away from you — and, in fact, I have property rights over the COPY because *I MADE IT*.

Thus, the original point stands, and the market continues to function properly, where the infinite supply causes the price to go to zero. That’s just good economics.

“You don’t seem to get that the factors that go into the production of IP is not infinitely available. The creators time is scarce. If someone is composing music this means he has to forgo doing something else. If he is coding software he can not do anything else.”

Actually, I have addressed this at great length elsewhere, though I guess you can be forgiven for not having bothered to have read it.

The point that the factors of production are not infinite is EXACTLY why all this works. You are correct that the factors are scarce, and that’s why there’s a REAL MARKET for those factors. You can charge someone for your time, because that is a scarce good. The point that I have made repeatedly (again, don’t accuse me of ignoring something when I’ve written at great length on it) is that every “infinite” good has many related scarcities, which are those factors of production. So long as you charge for those scarcities, and a market rate is set, then the calculation problem you are so obsessed with goes away.

There are still models that compensate creators for the scarcities involved in production.

It’s just that the overall market is made more efficient. And, as anyone with any economic knowledge knows, when you make a market more efficient, and remove the protectionist policies in the way, the size of that market expands. This is no different in IP. Your calculation question is silly, because we have yet to see a market where removing protectionist policies has NOT increased the overall size of the market.

“No matter how motivated the socialist man is he can not calculate how his scarce resource, time, will be allocated to produce IP.”

That makes no sense. You seem to be confused again. No one is suggesting that you don’t create a market for the *scarcities*.

“If you socialize IP, what will happen to the calculation problem.”

Well, since no one is talking about “socializing” IP, you seem to be asking in the wrong forum.

But if we talk about removing gov’t monopolies and letting the market set the price, the calculation “problem” is no problem at all. You get an efficient market, where alternate business models make production, distribution, transactions and promotions much more efficient. The end result, undoubtedly, is greater production. To argue otherwise would suggest that you simply don’t believe in the fundamental principles of free market economics.

Quotar January 26, 2009 at 4:44 am

ktibuk:

“I own myself … because I do.”

Thought I’d re-post that in case anyone missed it :)

Peter Surda January 26, 2009 at 7:22 am

@ktibuk
> A society where there are no writers, composers,
> actors , software engineers but only people who write
> their own novels, compose their own music, code their
> own software.
It is absurd to assume that copyright is necessary for any of those professions to exist. I have been a software engineer my whole career (and before that) and rarely, if ever, did my income depend on the existence of copyright (or patents). At the moment it doesn’t at all and while I’m not a millionaire, I think I’m doing well.

Once again, you are confused by the word “property” in the term “intellectual property”. The lack of copyrights does not prevent either possession or trade. It just causes business models based on monopoly rent to fail.

Cheers,
Peter

Joe B January 26, 2009 at 8:10 am

ktibuk: “The problem is the economic process you seem to think magically happens.”

ktibuk: “What if something is not valued by any other but the owner, thus its value is zero. Does it lose its status as property?”

The economic process I’m referring to is the ranking of preferences by individual actors, and the actions derived from these rankings. This is the cornerstone of economics.

I think you’re confusing value with price. Value is the position of a scarce resource on an individual actor’s scale of ranked preferences. It does not require trade.

An idea cannot be relinquished in exchange for a scarce good. It can be used as an input to a production process or disseminated to another person in exchange for a scarce good, but it is never consumed in either process. Since an idea is not scarce, it cannot be ranked against scarce resources on an actor’s value scale. Thus it is not subject to this process of economizing.

A price could be set for an idea. The scenario I described where other actors seek the idea as a future good creates a market for it. Demand is the quantity of learners, or buyers, and supply is the quantity of sellers willing and able to disseminate the idea (presumably in exchange for scarce goods), or could be a quantity of scarce goods resulting from the application of the idea. The price will be set accordingly.

Someone who has knowledge of the idea but is unwilling to disseminate it is not included in the market. This does not create a reserve demand such as is the case with scarce goods, because someone with knowledge of the idea cannot demand the same idea as a future good, or at least would gain nothing by doing so.

Once a buyer has gained knowledge of the idea, he can choose either to join the sellers in disseminating it or to keep it to himself. In the first case, the supply would increase, lowering the market price, and in the second it would remain where it is. In either case the demand would decrease, lowering the price.

IP rights aren’t required in order to allow this price to be set. Their effect would simply be to freeze the supply curve by preventing other sellers from entering the market. This is simply a monopoly like any other protected by law.

Whether this is ethically right or wrong is obviously the main contention of this debate. I think it’s wrong, or at least unnecessary. It would be subject to a different subset of ethics than physical property rights. These might be determined based upon utilitarian goals or creator’s rights, but they do not follow directly from economics as natural property rights do. In the interest of individual liberties, my opinion is that any non-essential universal law should remain unwritten.

ktibuk: “There is only one way that B copies without the consent of A and that is coercion.”

You’re claiming coercion under the assumption that IP rights exist, and using this to justify the existence of IP rights. I agree that B could violate A’s physical property rights, or more probably contractual rights, in the process of copying the idea. However, the crime is the violation of these rights, not the copying of the idea, and certainly not any dissemination of that idea unless it specifically violates a clause in a voluntary contract. Such a contract would have no scope over a third party as Kinsella has described.

So if B breaks into A’s recording studio, copies a master recording onto his own hard drive, then posts it on bittorrent, he would be guilty of trespassing but not theft.

A similar argument against physical property rights could be as follows: B breaks into A’s factory, brings his own raw materials, and manufactures a widget. He cleans up and leaves behind some cash for utilities and wear and tear on the machinery. He is guilty of trespassing, but is he also guilty of theft? Who rightfully owns the widget he produced?

Property rights are required in order to settle this dispute and provide incentive against such incidents. There is only one widget in existence and either A or B can own it. Both have contributed to its creation, although A did so unwillingly. A may agree to allow B to keep it as long as he pays A some additional damages. Or, he may pay B some amount, minus damages, to compensate him for his raw materials, and claim the widget.

B would receive nothing for his labor since no rate was agreed to prior to his doing the work. The amount of cash that B left is similarly irrelevant since it was not agreed upon.

In either case, B would likely have been better off negotiating a usage agreement with A rather than trespassing, and the dispute has gained a clear result.

So back to the recording studio – does A rightfully own B’s copy of the song? A still has his original recording. B has used this as a capital good, as he has used the computer on which it was stored, for which he would owe damages.

However, this does not automatically confer ownership of B’s copy to A. The production process is [use of Computer containing song] + [blank hard drive] -> [hard drive containing song]. So [hard drive containing song] is the widget in this case, and a dispute over the ownership of this scarce widget could follow the same process described above using only physical property rights.

If B used [hard drive containing song] to produce further copies of the song and it was decided that A owned this drive, would A have a claim to the physical items containing all of these additional copies?

In the case of the factory widget, B could have used the widget outside of the factory to produce other goods. Would A have a claim to these goods?

Obviously these answers would depend on each situation and the actors involved. However, in both cases physical property rights provide a sufficient framework for dispute resolution, thus IP rights are superfluous.

ktibuk January 26, 2009 at 8:16 am

Mike said,

“The point that the factors of production are not infinite is EXACTLY why all this works. You are correct that the factors are scarce, and that’s why there’s a REAL MARKET for those factors. You can charge someone for your time, because that is a scarce good. The point that I have made repeatedly (again, don’t accuse me of ignoring something when I’ve written at great length on it) is that every “infinite” good has many related scarcities, which are those factors of production. So long as you charge for those scarcities, and a market rate is set, then the calculation problem you are so obsessed with goes away.”

This is all nonsense. There can not be a REAL MARKET divorced from the consumer goods market. Markets are always connected.

A book consist of tangible and intangible goods. Or rather IP and the tangible stuff (paper, bindings and ink). “Human Action” and another book full of gibberish that has the same physical characteristics are not the same thing. What sets them apart is the content and that content creates different demand thus value.

If you cant have price for the IP part of that book, then you can not have price for the factor of production of IP. Yes you may have market for publishers, printers, binders but not for the person and who produced the IP. In this case Ludwig von Mises.

If you cant have a price for Mises’ time, you can not allocate his time. This is true for every producer.

This market of yours only could work for already created IP. Yes you would have vibrant market in the works of Aristotle, Dostoyevski, Alexander Dumas, etc but you wouldn’t have a market for anything new. And curiously every IP socialist gives this reproduction of age old works as examples of how the market would work in case all IP is socialized.

It is really frustrating to find out this many people this ignorant when it comes to economics especially on this site. But I guess that is partly because the blog is bloated with this IP socialism nonsense.

ktibuk January 26, 2009 at 8:27 am

Joe,

All you are saying is how the prices of IP in consumers market would be or could be zero.

Yes they could be zero if you abolish private IP rights.

I am saying after it becomes zero, there arises a calculation problem which you haven’t addressed.

I also elaborated on this on my response to Mike.

IP is not something that exists naturally as a free good. Novels, songs are not picked up like apples. They are produced using scarce resources. If you want more of them to be produced there has be to a market for them. And if there will be a market for them there has to be private property.

Peter Surda January 26, 2009 at 10:52 am

@ktibuk:
> A book consist of tangible and intangible goods.
The “intangible good” is only in people’s minds. It is not a property of the book, but a property of the interaction between the book and people.

> If you cant have price for the IP part of that book …
As I demonstrated several times, having a “price for the IP” has nothing to do with copyright. Price is the result of scarcity, not rivalry. Stop claiming that without IP, intellectual goods do not have prices.

> This market of yours only could work for already created
> IP.
Empirical evidence shows otherwise.

> It is really frustrating to find out this many people this
> ignorant when it comes to economics especially on this
> site.
Funny coming from someone who is completely oblivious to the fact that there have been, and still are, plentiful of vibrant markets with immaterial goods which do not rely on intellectual property laws. Also, empirical evidence seems to indicate that IP laws decrease, not increase, the size of markets.

> But I guess that is partly because the blog is bloated
> with this IP socialism nonsense.
Repeating a definitionless accusation is not an argument.

Cheers,
Peter

Joe B January 26, 2009 at 6:25 pm

ktibuk,

I haven’t said that prices are zero, only that they decrease as more people become capable of disseminating the idea. I will agree that the price would eventually go to zero, but this is due to the fact that an idea is infinitely durable. You wouldn’t buy multiple copies of the same book for your own use.

The same would be true for an indestructable washing machine – once everybody who wants one has one, there is no more demand. Before this happens, there is profit to be made.

After this happens, there is no need for further calculation – the idea has been produced and the profits have been made. In the case of washing machines where each unit takes additional scarce resources to produce, additional calculation would occur, but the result would be that production of one more unit is not profitable. This is congruent with the market’s demand since everyone who wants one has one.

The calculation should have taken this fact into account when determining the potential market, and this would have happened prior to the development of the idea. If the process of disseminating the idea requires scarce resources, such as time, then their allocation can still be calculated based on the market price. If the price is zero, indicating that everyone who wants a copy of the idea has one, then the supplier will choose not to expend further resources to continue disseminating it.

IP rights would slow this process or artificially raise the price by restricting supply, but they would not guarantee a market forever. You can’t make an idea non-durable.

While this could make an idea less profitable than it would be under IP protection, it doesn’t preclude a viable market. It does provide incentive to develop more efficient methods of production, expending less resources to produce more desirable ideas. A prolific popular artist would stand to gain more than an equally popular artist who produced fewer works. A band who recorded a popular album in their garage would profit more than a band who recorded an equally popular album at an expensive studio.

The band who spent more resources recording their album does not deserve a higher price for it – this would only be the case under a labor theory of value. If people tend to prefer the production quality of this album over that of the garage band, then demand, and thus the price, would be higher. There is no entitlement in a free market.

An idea is a non-scarce, infinitely durable capital good. It is a production input to consumer goods, which in turn could be used as capital goods to produce other consumer goods using the idea.

An idea can be used to produce any number of derivative goods. A song can be recorded, or it can be performed live. If the market price of recordings went to zero so quickly that it made the recording process financially unprofitable, would the band decide to record it? While they may not profit directly from the record sale, they stand to benefit in other ways – fame, appreciation, higher attendance at their shows, etc. These are ends which they would consider prior to expending the effort to record, and in many cases are sufficient incentives.

A book of gibberish will find a lower market price than Mises’ book. A lecture by Mises discussing the book will find a larger audience than the chimpanzee who wrote the gibberish (the chimpanzee’s other charms notwithstanding).

These goods cannot be separated into their tangible and intangible parts – a buyer either purchases the whole good or he keeps his money. If the author of a book claims a copyright, this will affect the buyer’s decision since he must be aware of the contract to which he is consenting in buying the copyrighted book. In order for this copyright to be effective, it must prevent anyone besides the buyer from reading that copy of the book.

This in turn will affect the author’s profits, so he should decide the terms of any such contract prior to producing goods from his idea. These terms should not be dictated by a universal statement of IP rights.

This is why contractual and physical property rights alone are sufficient to protect and incentivise IP.

vc July 3, 2009 at 8:25 pm

“IP socialists always confuse property with protection of property, and they also confuse property with value. Logically protection issue must come after the homesteading. Protection issue can not precede homesteading. To claim this is logically absurd. Property is having the right to do whatever one wants with something. Robinson Crusoe owns the fish he catches, he can do whatever he wants with it. He doesn’t have to wait for Friday to come to the island, to make the fish his property. If he did he would die.”

The question is whether Crusoe can make the idea of putting a worm on a hook his property, dear sir.

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