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Source link: http://archive.mises.org/9357/back-to-basics-on-property-and-competition/

Back to Basics on Property and Competition

February 2, 2009 by

Zeroing in on a topic like “intellectual property” offers a chance to clarify fundamental notions in economics generally. You think you understand something like property rights or the nature of competition–you have studied the ideas for years!–and then a challenge comes along that blows everything up. It’s an opportunity. Time to think and think again.

Is there really property in ideas and, if so, what rules should govern it? Is it really necessary that such property be protected in order that competition be kept fair and just and efficient?

The authors of Against Intellectual Monopoly state at the outset of chapter six that property is a great and indispensable thing. It allows people to own, develop, be creative, profit, and build a prosperous society. Societies without private property stagnate and die.

Property rights are necessary too when there is a limit on the number of things in question. But owning a thing doesn’t prevent others from owning other things too. For example: cars. They must be allocated through property rights because there is a potential for conflict if they are collectively owned. But my owning a car doesn’t prevent you from owning a car. There is no coercion involved in the institution of ownership.

The authors make a very important point with regard to ideas. If you have an idea, it is yours. You can do with it what you want. If you share it (sing, speak, broadcast, let others see the products of your ideas), others then have copies of it. They are entitled to do with their copies of the idea precisely what you can do with your idea. They can use it how they want provided they don’t prevent others from doing with it what they want. This is a simple application of the non-aggression principle that governs a free society. Whether it is fashion, language, know how, or whatever, people are free to copy.

Ideas, then, are what Mises calls “free goods”: copies are potentially limitless. They “do not need to be economized.”

“Intellectual property” is the completely wrongheaded idea that, in the words of the authors, someone has the right “to monopolize an idea by telling other people how they may, or more often may not, use the copies they own.” This strikes at the heart of progress because it means improving what exists but rather prohibiting others from using and improving it.

In the same way that property is good, competition is also good. It inspires people to strive for excellence, and to measure their progress against what other are doing. It allows people to try and fail or try and succeed. It permits people to learn from each other, looking at what others do that is successful and emulating them. This is how society leaps forward from stage to stage: how we went from horses to engines, how plumbing came indoors, how industry took over from agriculture, how the digital came to be.

Competition is predicated on the ability to learn and copy. If you think about it, this is the essence of daily life. We watch how people do things and learn from them. We get on the subway and hold the stabilizing strap a certain way. We follow fashion sense. We watch the food network. We listen to our professors and talk to other students. We read and absorb the ideas of articles on the internet. The newly taught person becomes a competitor: the student becomes a professor, for example. The protege is always a threat to the monopoly previously held by the mentor.

What can you copy? Anything and everything. This is not “taking” anything from anyone. The owner of the original idea still has his. Other people now have their copies, and are free to improve it.

Commerce is part of this stream of life, and, in fact, learning through imitation and improvement is even more crucially important if we want to sustain a rising population with ever better health and well being at their disposal.

Let’s say I write a book and publish 1000 copies. They are all mine. When I sell one, I now have 999 remaining and the new owner of the one book, in a free society, is free to do with his copy what he wants: use it as a placemat, throw it away, deface it, photocopy, and even republish it. You can even re-republish it under your own name, though that would amount the socially repudiated vice of plagiarism (vice, not crime). The new copies, which always involve some cost, compete with old copies.

What are the advantages of living under intellectual freedom as described above? The authors list three main ones. 1) The number of copies is more plentiful and that price is thereby lower, which helps consumers. I like this point because it underscorces that IP is really what the old classical liberals denounced as a “producers’ policy” like protectionism or industrial subsidies. It beefs up the bottom line of specific firms at consumers’ expense. 2) The initial innovator still earns money as in the perfume or fashion or recipe industry, 3) “The market functions whether there is one innovator or many — and socially beneficial simultaneous innovation is possible.”

The authors give the example of Mozart and Beethoven, who published without IP but did very well by being the first to market. This is the source of profits. It’s the same today with products such as the iPhone. It was the first time market, and Apple made a killing, enough of one to have inspired and ratified the initial innovation. Now they are attempting to prolong their period of monopoly profits by considering patents suits against imitators. Society is certainly not better off under these conditions. As the authors say, “the goal of economic efficiency is not that of making monopolists as rich as possible; in fact, it is almost the opposite. The goal of economic is that of making us all as well of as possible.”

It’s interesting how people immediately object that no one would create things under free-market competition. Look around! A tiny fraction of what we use and experience every day is subjected to intellectual monopoly. And look at your own life. Do you trim the bushes in front of your house only because you then have copyright to your new design? Do you take a caserole to a pot-luck lunch only on the belief that no one is permitted to copy your dish? Do you wear a navy jacket with a yellow tie only on the condition that no co-worker is permitted to do the same? There was no IP at all for many centuries during the greatest period of modern economic growth from the 15th century onward.

Others generate all kinds of arguments to show that competition doesn’t work. For example, we are told that very high costs are associated with some investments, and so monopoly is required in order for investors to make a profit and thereby have incentive to invest and innovate. The authors cite the cases of shoes and gasoline. Building a shoe factory or an oil refinery plant is a very expensive undertaking, and competition is everywhere. But somehow no one suggests that these must thereby be produced under monopoly conditions. I suggest that that reason is that we live and experience competitive conditions in these industries; it is so difficult for people to even imagine freedom where it doesn’t exist.

I recall a story told to me by an economist who was serving as an adviser to a former Soviet satallite state. He advised free labor markets and privatization. Officials objected that this wouldn’t work because people might build plants where there are no workers. He said that people would just move to the places where capital is most profitable for labor. The officials objected that they couldn’t possible allow the freedom for people to live whereever they wanted; this would amount to an intolerable kind of anarchy. They just couldn’t imagine how such a system could work!

There are advantages to being the first mover in markets, and here is the main source of the innovator’s profits. But there is no reason to freeze the market process right there. In many ways IP represents the same fallacy that antitrust does: it takes a snapshot of the economy in one stage and evaluates it and manufacturers a policy response. Antitrust tries to break up what only temporarily appear to be monopolies; IP attempts to create and sustain monopolies over time. Competition, contrast, let’s the market work as an undirected and uncontrolled and rivalrous process of discovery, emulation, and creativity.

Will some firms suffer under competition? Of course. “Competition is not a gala dinner,” write Boldrin and Levine, “and getting rid of inefficient firms while allowing efficient ones to blossom is exactly what competition is supposed to accomplish.”

The chapter ends with a hymn to imitation as a social force. These few paragraphs are so important that they need to be the subject of excerpting in total in a Mises Daily. What they imply is something that I believe has been overlooked by classical liberals. It is a foundation of social order. And that gives us three talked about this chapter: property (which gives rise to exchange), competition (a species of cooperation), and imitation (learning through emulation).

{ 26 comments }

jmh February 2, 2009 at 1:15 pm

“You can even re-republish it under your own name, though that would amount the socially repudiated vice of plagiarism (vice, not crime). The new copies, which always involve some cost, compete with old copies.”

Well if you do re-publish it under your own name, you are committing fraud. I would say it would be more egregious if a famous writer/scholar copies someone else’s idea and passes it off as their own. Imagine if you bought a von Mises book, but weren’t really getting von Mises (but let’s assume same topic, just not as well-written). You would say it were fraud if the same thing happened with a stereo. If I took some cheap parts and put them together and called it a Sony and sold it, you would be able to say I committed fraud. Same thing here.

Benjamin Burkley February 2, 2009 at 1:41 pm

I just can not get my head around this idea that people dont have a right to their ideas. If I create a song, or painting, or anything that takes the enffable capital created by my brain. How is it right, for another person, who could not and did not create that work of art to profit from my labor? Is that not stealing, counterfiting?

How if I am a great artist I create a wonderful work of art, I am only willing to sell this work of art that I created for 50 dollars. Because that is how much it is worth to me. How is it right for someone to buy that work of art, scan it, print copies for 50 cents and then sell them for 20 dollars and take away all of my business???

Some one please let me know. It just seems that wrong.

I mean, I bear all of the sunk cost. So no matter what the copier can out bid me on price. He has no capital invested in the project so anything he sells is 100% profit, where as anything I sell, I must regain the capital i put in before I make a profit.

That puts the counterfiter at an advantage does it not? How does this encourage innovation.

haveing no IP works when there is no means to cheeply copy and reporduce goods. But I think it fails when you can produce them quickly, cheeply and of high quality.

someone let me know why I am wrong.

Zeroing In..... July 20, 2011 at 7:21 pm

You are completely missing the point. Please re-review the blogs paragraph:

“It’s interesting how people immediately object that no one would create things under free-market competition. Look around! A tiny fraction of what we use and experience every day is subjected to intellectual monopoly. And look at your own life. Do you trim the bushes in front of your house only because you then have copyright to your new design? Do you take a caserole to a pot-luck lunch only on the belief that no one is permitted to copy your dish? Do you wear a navy jacket with a yellow tie only on the condition that no co-worker is permitted to do the same? There was no IP at all for many centuries during the greatest period of modern economic growth from the 15th century onward.

Zeroing In..... July 20, 2011 at 7:22 pm

Were you especially able to get your head around the last statement:

“There was no IP at all for many centuries during the GREASTEST PERIOD OF MODERN ECONOMIC GROWTH from the 15th century onward.”

I Hate Taxes February 2, 2009 at 1:51 pm

Benjamin Burkeley,

You can control things but you can’t control information. Somebody else can always copy, modify, reverse-engineer. How are you going to stop that ?

Your best bet is to let people copy your ideas but be the first to mention your ideas. You will get recognition for your ideas, you will earn a reputation and even if people can copy your ideas, they cannot create at your place.

You can always sell your first creation services, be the first to invent and always be on the edge. And STOP investing your time and money in a product or service once you lose money and move on to the next thing.

I would be happy that people copy my ideas, it would mean I am doing something right.

With this being said, what’s with mises.org’s obsession with IP lately. Please change the subjetc.

I Hate Taxes February 2, 2009 at 1:54 pm

Benjamin,

How about your keep your inventions secret, then when they are perfected, you sell them to the counterfeiters ?

C. Evans February 2, 2009 at 2:19 pm

“With this being said, what’s with mises.org’s obsession with IP lately. Please change the subjetc.”

I think the obession is a good one. These posts have really fired up the Mises community. I read one comment which called Jeffery Tucker a communist for rejecting IP. Many libertarians and Misesians have very strong opinions about IP because we all believe in private property. The IP debate, then, is over the question “Are ideas property?”

I haven’t put much thought into this subject as I am still trying to understand business cycle theory, capitol theory, and praxeology enough to explain it to friends and family, but I have enjoyed reading the blog posts and the comments on this debate.

(8?» February 2, 2009 at 2:28 pm

Benjamin Burkley wrote
“I just can not get my head around this idea that people dont have a right to their ideas. If I create a song, or painting, or anything that takes the enffable capital created by my brain. How is it right, for another person, who could not and did not create that work of art to profit from my labor? Is that not stealing, counterfiting?”

The idea behind the creation, and the physical instances of your creation are two different things. While you own the physical books, paintings, or recordings you created, the ideas that inspired them are not exclusively yours, as they are derivative works based upon the ideas of others that provide the common ground for communication of “your” idea.

You may write a book, but from an intellectual property point-of-view, you “stole” both the language, and the alphabet. Neither of these are your property, but without them, you have no book, or even a reference for communication. Luckily for you and I, these properties exist as common property, and are free from restraint.

Could you imagine the retardation of society if every instance of communication required royalty payments to those who “created” this intellectual property?

There simply is no such thing as an “original” work. Everything is a derivative, coming into being as an improvement/alternative to what already was in existence.

To insist upon “protecting” the alleged owners of this “property,” is to stagnate human progress through the suppression of the sharing of ideas.

Without IP, we probably would’ve had our flying cars, and countless other “futuristic” inventions, years ago. While some may like to counter about the sunk-cost of R&D, and loss of profits to free-riders who undercut the entrepreneur, they fail to realize that the very “undercutting” actions serve as FREE R&D for all who participate! Why? Because without IP, everyone doesn’t have to reinvent the wheel. They are now free to invest time and capital inventing tires, or some other more advanced wheel technology, which the wheel inventor can then incorporate into his own products.

It is by far and away the most economical usage of the always scarce resources at our disposal. It serves only those who hold title to ideas over the lives of others. The internet, of course, is the best example of ideas that were free for anyone to implement. An internet IP ownership society could never have achieved so much in so little time.

There are also no contradictions concerning property rights once you realize that all ideas are derivatives brought forth from the common ground of human history. There just aren’t any “rights” to be had.

ktibuk February 2, 2009 at 2:41 pm

“You may write a book, but from an intellectual property point-of-view, you “stole” both the language, and the alphabet. Neither of these are your property, but without them, you have no book, or even a reference for communication. Luckily for you and I, these properties exist as common property, and are free from restraint.”

Why do you think the only alternative to owning an idea exclusively is stealing? Have you heard of a concept called “gift”? What if language and alphabet (and math and basic sciences) are gifts from our ancestors? Can not one create a language himself and exclusively own it?

“Could you imagine the retardation of society if every instance of communication required royalty payments to those who “created” this intellectual property?”

Again why do you suppose every property (ideas in this case) is the subject of an economic exchange? Do you think every tangible property is exchanged against some other good? What about charity, or promotion?. Does the existence of these is enough to abolish all private property?

“There simply is no such thing as an “original” work. Everything is a derivative, coming into being as an improvement/alternative to what already was in existence.”

There is also no creation of tangible property. Matter and energy can not be created out of nothing. All tangible property is a derivative of existing natural resource and also an improvement to what was in existence. Does homesteading depend on being absolute original, creating something out of nothing? Does this mean we should abolish all private property?

“To insist upon “protecting” the alleged owners of this “property,” is to stagnate human progress through the suppression of the sharing of ideas.”

Is the human progress deciding factor when it comes to property rights? Who decides what human progress is? Or how much progress should we be aiming engineering property rights?

“Without IP, we probably would’ve had our flying cars, and countless other “futuristic” inventions, years ago. While some may like to counter about the sunk-cost of R&D, and loss of profits to free-riders who undercut the entrepreneur, they fail to realize that the very “undercutting” actions serve as FREE R&D for all who participate! Why? Because without IP, everyone doesn’t have to reinvent the wheel. They are now free to invest time and capital inventing tires, or some other more advanced wheel technology, which the wheel inventor can then incorporate into his own products.”

Would these flying cars be using fossil fuels, or solar power? What other futuristic stuff we are missing out? What about time machines?

College Parasite February 2, 2009 at 3:00 pm

I think people get their heads turning over this issue because producers of “intellectual goods” often make a living off of it, and cherish their creations.

Imagine a situation that’s less emotionally charged but works well as an analogy: you pay 10 grand a month to a chef to make incredibly good pizzas. Half a month into the business, someone realizes that the pizzas are very expensive in relation to what it takes to make them. He spends some time studying the pizzas, then sets off to make similar ones and sell them at half the price.

The painting example is different in some ways: the effort the copier has to make is very small compared to the original painter’s. But the essentials are the same. Even so, pizza-copiers get much less flak for their “counterfeiting” than do painting-copiers.

I think it’s morally wrong to not give a band any reward for a great song even while I listen to it, but that doesn’t change the fact that I’m not trespassing on their property. I didn’t steal their guitars or force them to perform at gunpoint. That alone should exempt me from any criminal responsibility.

It makes sense to ask: but what will happen when bands can’t make any money because anything they sing will be almost instantly uploaded and nobody wants to pay for official albums? That kind of question is comparable to “but what will happen to all the people who lost their jobs?!”, which leads to “the government has to do something about it!”. In the case of factory or agricultural jobs, the “something” is bailouts and tariffs; when it’s bands or engineers or pharma, it’s IP.

If you say that commercial bands failing because IP has been abolished are an evidence of “market failure”, you’re not being any different from the supporters of bank and automaker bailouts: “oh poor beings. They’re doing their jobs, but the evil market doesn’t want to pay them for it. Let’s fix that.”

Is it possible that worthy innovators will disappear because they failed to make people notice their work and ask for more? Yes, of course. But that’s true in every instance of the market. Yelling out “hey! I’m a smart guy! Hire me!” is just as necessary a part of success as being a smart guy in the first place.

Ken February 2, 2009 at 3:17 pm

It makes sense to ask: but what will happen when bands can’t make any money because anything they sing will be almost instantly uploaded and nobody wants to pay for official albums?

Didn’t seem to hurt the Grateful Dead any.

Francisco Torres February 2, 2009 at 4:28 pm

It makes sense to ask: but what will happen when bands can’t make any money because anything they sing will be almost instantly uploaded and nobody wants to pay for official albums?

This question is loaded. How would you know they are not making ANY money? If people downloaded their music, then they would not make money from selling CDs (and that would depend on the cost of the CD. It is still easier to buy a CD than to download music, but if a producer attempts to pluck $19.99 from potential customers for a lousy CD, people WILL spend the time to download music). Bands also make money by relying on gigs and shows, which is why many bands form in the first place (and for the girls, and the drugs . . .)

snowflake February 2, 2009 at 5:16 pm

Property rights don’t really exist in a truly free market. When they appear at all, it is because people agree they are an efficient thing to have, and are willing to bear the costs to implement whatever enforcement mechanisms.

Therefore, it is stupid to talk about property rights being provided by government because – in the best case scenario – when government guarantees property rights, they don’t factor in the cost of enforcing these rights, and you get wildly impractical ownerships being enforced.

For example, if I claim to own miles and miles of land, the cost to protect my property from trespassers is very high. Under a free market, the cost of fencing off my land must be weighed against whatever utility I might gain by doing so.

However, with government, they have an obligation to protect what is “mine”, even though building a massive fence is entirely impractical. This may cost a ton of money, and might never work.

This is very similar to the IP issue, where producers of IP claim to own things that are very hard to protect.

In the free market, producers of IP are left to their own devices to see what they can do to maintain their monopoly over their at-risk products. However, if it is too costly to protect their IP from being downloaded, the project is unprofitable and we all know what that means.

i.e. in a free market, how stupid are you to invest your time and money into something even a 12 year old can steal. duh

Copyright laws are an attempt to EXTERNALIZE the costs of protecting at-risk property, thus allowing otherwise unprofitable businesses to operate.

In fact, defenders of liberty must admit that universal property rights are inegalitarian as long as property distribution are uneven, since the costs of defending the riskiest property are distributed to those who might not even own any.

Deefburger February 2, 2009 at 10:26 pm

Ok, for those of you unfamiliar with the great music-for-free-download experiment conducted by Trent Reznor and NIN:

http://www.thespacelab.tv/spaceLAB/2008/03March/MusicNews-28-NIN.htm

They made bank last year! No DRM. Free Download in High res, the whole album. No need for copy protection in a free market.

Deefburger February 2, 2009 at 10:55 pm

For those who didn’t follow the link, they made $1.6 in direct sales of CDs THE FIRST WEEK.

“Fresh out of the box, the numbers for the first week of the Nine Inch Nails release of Ghosts has been released, and all in all, it was a pretty good week to be Trent Reznor.

The magic number was 781,917 downloads. That includes the free and paid downloads plus orders for the physical CD product. As a total, the downloads and physical product orders amounted to a total sales figure of $1,619,420 in U.S. dollars.”

This album was released by the band directly. The made downloads available of the entire album for free. There is no copy protection (no DRM or Digital Rights Management). The CDs and other physical media were made available for purchace online.

IP proponents said they would go bust from no sales since “any 12 yera old” could make a copy.

Guess what? Not so. $1.6 million is no small amount of income for a band with no record industry contract. This is an excelent example of how the market really works without IP.

Joe B February 2, 2009 at 10:59 pm

snowflake: “Property rights don’t really exist in a truly free market. When they appear at all, it is because people agree they are an efficient thing to have, and are willing to bear the costs to implement whatever enforcement mechanisms.”

Well put. This is the fundamental truth that I’ve been alluding to in my comments on various other posts.

Property rights have arisen as an emergent phenomenon from the evolutionary market process. It’s cheaper to agree on property rights than it is to continually fight over scarce resources, and this has led to the almost universal acceptance of property rights.

The “shoulds” that are expressed in natural rights arguments are psychological concepts applied after the fact to reinforce the system. I would say that the term “Natural” is more appropriate to a system of rights that have naturally evolved through the market process than to an arbitrary definition derived from a philosophical concept of self-ownership. Different “shoulds” or different interpretations of these “shoulds” create the conflicting views of property rights that exist today. This is the price you pay for trying to control or moralize a truly natural system.

Property rights can be thought of as a contract. This means that any two people who agree to a certain definition of property rights also agree to the means with which they are willing to be subjected in reparation for any violation of the other’s rights that they may cause. This removes the need for coercion of any kind to protect property against those who have agreed to this contract.

Someone who has not consented to this contract has no defined rights under it. This means that others can take any means they choose against him without violating his rights. They can steal the sandwich out of his hand without violating his rights, because he has not consented to having these rights. If he steals property from someone who has consented to a property rights contract, the victim may retaliate in any way they see fit. This gives the thief a good incentive to consent to property rights, although there is also the threat of retaliation from the thief since he has not agreed to respect the victim’s rights.

This concept also means that multiple conflicting definitions of property rights could exist. This would likely result in a system of multiple groups of people (such as capitalists and socialists) fighting over the same resources. While this may initially be violent, ultimately they would work out a system by which they could all agree on property rights since this would be less expensive than continuous war.

This would be the exact same process as the evolutionary one that resulted in our current definition of property rights as long as individuals were able to freely choose which system they preferred. So which definition of property rights do you think would win?

With IP, we have skipped past this natural evolution of rights and gone straight to the moralizing based on analogies or extensions of a particular moralization of physical property rights. Since there is no natural (evolutionary) basis for IP rights, how do we know which “shoulds” to reinforce? There’s your calculation problem.

The most convincing arguments for IP end up being utilitarian in nature (“Without copyright, nobody would write books”), but these are obviously speculative and thus don’t hold much water. Over time, a free market would reveal the truth behind such statements and would deliver us an appropriate definition of IP rights, if one were needed at all.

I’d like to re-ask the question I asked on my first comment in these threads last week:

What are pro-IP’ers arguing FOR?

ktibuk has said that he agrees that creators should bear the costs of their own IP protection, and I think almost everyone here would also agree. So this rules out enforcement by a coercive state.

Maybe they are just trying to speed up the evolutionary process by assuming the end result. However, this is likely to prove counter-productive since the rights they are promoting appear to be in conflict with the market’s desires.

ktibuk February 3, 2009 at 4:42 am

Joe B

“Property rights have arisen as an emergent phenomenon from the evolutionary market process. It’s cheaper to agree on property rights than it is to continually fight over scarce resources, and this has led to the almost universal acceptance of property rights.

The “shoulds” that are expressed in natural rights arguments are psychological concepts applied after the fact to reinforce the system. I would say that the term “Natural” is more appropriate to a system of rights that have naturally evolved through the market process than to an arbitrary definition derived from a philosophical concept of self-ownership. Different “shoulds” or different interpretations of these “shoulds” create the conflicting views of property rights that exist today. This is the price you pay for trying to control or moralize a truly natural system.

Property rights can be thought of as a contract. This means that any two people who agree to a certain definition of property rights also agree to the means with which they are willing to be subjected in reparation for any violation of the other’s rights that they may cause. This removes the need for coercion of any kind to protect property against those who have agreed to this contract.”

In light of what you have written above, I am wondering what you think about “forced slavery” and “voluntary slavery contracts”.

ktibuk February 3, 2009 at 5:01 am

Deefburger,

“Guess what? Not so. $1.6 million is no small amount of income for a band with no record industry contract. This is an excelent example of how the market really works without IP.”

You are making a paradigm mistake. These bands did this in a copyright environment. Not only a copyright environment but in a battle ground between the record companies and millions of kids who think they have right to download what ever they want.

So this “experiment” is affected by all of this and became a publicity stunt. I dont care about NIN abit but even I have heard of this before.

It is doubtful then, in the case that all IP is removed and all the bands doing the same thing, they would be this successful.

The same is true for many open source projects in software. If there wasn’t IE there wouldn’t be FF, or if there wasn’t Windows, there wouldn’t be Linux.

These are somewhat reactionary projects, and if there isn’t anything to react to they wouldn’t exist. Or they wouldn’t exist as they do now, but be much more inferior.

Also about the argument that performers may make money by performing and they wouldn’t need IP rights.

There is a wrong assumption that performer and producer must always be the same persons but even leaving that aside, what if I said.

“You may never own any tangible property, but don’t worry you may always exchange your labor for whatever you need, so you wont starve”

Would this help justifying abolishing property rights in any possible way?

Joe B February 3, 2009 at 6:55 am

ktibuk: ‘In light of what you have written above, I am wondering what you think about “forced slavery” and “voluntary slavery contracts”‘

“Voluntary Slavery” is an oxymoron. If it’s slavery, it’s not voluntary, and vice versa.

I assume that you are implying that slavery could be possible under the purely contractual system I have described. This is true, since one person could enslave another who hasn’t agreed to their contract, without violating their undefined rights. This provides another strong incentive to agree to property rights – you give up your ability to enslave someone else in exchange for protection against them enslaving you.

However, if you have other means of protecting yourself against an aggressor, you are free to use these means instead. You may suggest that this could result in gangs of warlords sacking the land unchecked. However, this is the same scenario as the individual thief that I described before, only on a grander scale – the victims would likewise be free to use any means available to protect themselves. This fact alone could raise the risks enough to be a powerful deterrent.

Instances of slavery and other coercion are possible in a free market. There will always be someone willing to take advantage of another, and without a coercive state in opposition to these actions, the aggressor may achieve his goal. However, he would face the constant threat of revolt, and would have no state to call in for reinforcements. His protection would be expensive. In addition, he would have difficulty selling his product to people who respect property rights – and might even face 3rd party retribution from some of these on principle.

So is it ethical to coerce everybody in a society to abide by a specific definition of property rights in order to prevent other isolated instances of coercion?

Why is it that the free market can provide a solution for all of life’s problems, but somehow falls short when it comes to protecting property – justifying coercion?

Removing the illusion that someone else is protecting you against aggression allows you to allocate resources to your own protection in accordance with the actual risk. If you can reduce this risk by agreeing to a voluntary, contractual legal system defining property rights, you will likely have more resources to allocate towards more desirable ends.

I’m not sure what you’re arguing here, other than to start throwing around the word “slavery” since nobody is buying “IP Socialists” or your twist on calculation. You haven’t offered any reasonable argument, and have again avoided my question: What solution are you proposing?

snowflake February 3, 2009 at 9:56 am

I don’t know if property rights are best conceived of as contracts.

Clearly, by buying a gun, I can enforce my claim to property without anyone else having agreed to my ownership. Furthermore, any contract I made with someone would be at risk of being broken the second that breaking that contract became cheaper than keeping it.

In other words, agents are always reasoning which claims to property to respect, and which to break.

So property rights are not fundamentally contractual, a general theory of rights is rooted in reason/pragmatism.

As far as coercion goes, we go back to cost effectiveness. i.e. If it is cheapest to coerce/enslave someone. In some cases, it certainly is. For example, it is cheaper for me to hire a security guard to defend my store than it is to have people rob it.

The difference between the free market the government is that the free market exercises cost-efficient coercion, whereas the state can support unprofitable types of coercion.

In real life, the cost of coercing someone goes up the more decentralized you get. It would be insanely difficult for 1 man to permanently enslave another, but easy for a concentration of 1000 men to do so.

Technology also plays a roll in this, but I think at the end of the day the market has come to the conclusion that you have more to gain by working with someone than paying armed forces to coerce them.

I think we can all agree that we are more afraid of state coercion than marketplace coercion.

Deefburger February 3, 2009 at 11:05 am

ktibuk:”You are making a paradigm mistake. These bands did this in a copyright environment. Not only a copyright environment but in a battle ground between the record companies and millions of kids who think they have right to download what ever they want.”

Not exactly. It is true that this move by NIN was in the context of copyright. However, their success with it as a free download illustrates the point that the market does not “dry up” for the artist simply because anybody can have a copy of the work for free. I got my free copy, and I’m certain I will probably not spend a dime with them. That said, in the first week of the release of the album they took in $1.6M in direct sales of tangible and intangible goods.

There is nobody out there producing copy CDs of the work and “Stealing” their product, even though any 12 year old could do it.

I put this up as an example of how the artist can still benefit directly from his work, even though the copying and distribution of the work could be hijacked at any time by anyone willing to make a copy. It is a business model that IP proponents calimed would fail, and just the opposite happened in reality.

In a market without IP, it is reasonable to expect similar results.

ktibuk February 3, 2009 at 11:25 am

Deefburger,

You are claiming that man may act consciously NOT to better (or worsen) his state of affairs, which is a praxeological impossibility.

If someone is choosing to pay for something where he can get the same thing for free, then two alternatives (in this case albums) are not the same goods.

It may be that “the satisfaction of supporting a cause” may be bundled with the album that was “bought”, and the album that was “downloaded” was just the album.

I am saying if it was your way and there was no IP, you wouldn’t get the extra satisfaction thus you wouldn’t pay for it.

Joe B February 3, 2009 at 5:48 pm

snowflake: “So property rights are not fundamentally contractual, a general theory of rights is rooted in reason/pragmatism.”

I agree that they are not derived from contractual agreements; what I have proposed is that they should only be protected through contractual agreements, or otherwise at the expense of the owner.

I don’t think that such contracts would eliminate the need to put locks on your doors, but they would provide a means of enforcement that both parties have consented to. Breaking the contract would mean that you are no longer subject to its protection, and that any means could be used against you in retribution.

If it became less expensive to break these contracts on a large scale, this would indicate that some more effective means of protection had been introduced and widely adopted. As long as this new technology doesn’t involve guys with guns coming to my house to collect payment for other people’s protection, I’m all for it.

snowflake February 3, 2009 at 10:10 pm

I think it holds that contracts will be broken when it becomes advantageous to do so. Joe B is right that contracts are generally a cheaper and more acceptable way to do things, which is why we feel comfortable with them.

However, there are obvious examples of contracts being broken when advantageous, such as environmental regulations, and the point is simply to accept that the breaking of some contracts is inevitable in a free market.

If you want a universal acceptance of contracts, you can either try to find a group of nice people, or have government try its hand at coercing everyone into keeping their promises.

Which doesn’t work at the end of the day, since even if government would kill someone for breaking a contract, it is possible that someone would value breaking that contract more than their life.

With respect to IP, this is obviously the case where an (imposed) contract is being broken because it is waaaaaaaaaaaaay cheaper to copy ideas than it is to buy them, and the consequences are basically nil.

The only solution to maintain this contract is to impose crazy punishments for breaking the contract. But this won’t even work because it is very simple to scramble your IP and do all sorts of other things that make it impossible to trace you.

The question at hand is whether we should agree to such a contract, and that depends on how advantageous such a contract is to IP consumers/producers.

Obviously the free rider problem presents itself, since even if most people agreed to the contract and would pay IP producers what they charged, I could still copy my IP products.

Whether or not this system floats depends on how many people feel compelled to abide by the contract, and this can only be determined case by case, since the cost, availability (i can’t find indi movies to download), and moral scruples of the industry’s consumer base determine how effective such a contract is.

The question of what type of IP paradigm we “should” have comes up again and again, and this question is kind of moot because of the above observation that no general paradigm will suit both sides of the contract in the diverse IP market.

Its up to the consumer base and IP producers (as entrepreneurs!!! The NiN example…) to find a way to make it work.

Stephan Kinsella February 4, 2009 at 11:20 pm

Ktibuk:

“There is also no creation of tangible property. Matter and energy can not be created out of nothing. All tangible property is a derivative of existing natural resource and also an improvement to what was in existence. Does homesteading depend on being absolute original, creating something out of nothing? Does this mean we should abolish all private property?”

EXACTLY–there is no creation of tangible property either. Creation is NOT NECESSARY for ownership. Neither is it sufficient. Rather, it is APPROPRIATION–first use–of a previously unowned scarce resource that is the means of homesteading it.

Now you’re getting it!

Stephan Kinsella February 4, 2009 at 11:20 pm

Ktibuk:

“There is also no creation of tangible property. Matter and energy can not be created out of nothing. All tangible property is a derivative of existing natural resource and also an improvement to what was in existence. Does homesteading depend on being absolute original, creating something out of nothing? Does this mean we should abolish all private property?”

EXACTLY–there is no creation of tangible property either. Creation is NOT NECESSARY for ownership. Neither is it sufficient. Rather, it is APPROPRIATION–first use–of a previously unowned scarce resource that is the means of homesteading it.

Now you’re getting it!

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