Intellectual Monopoly Is an Unnecessary Evil

monopolyIn a rush to stimulate the economy, the Obama administration is touting various “visionary” plans to make the American economy more progressive, more innovative, and more forward-looking by subsidizing politically-motivated projects like “green” technology. These hands-on policies will be ineffective. Recent research suggests that a much more effective way to accomplish the same goals would be to eliminate intellectual monopoly and to reduce the regulatory burdens on innovators.

According to conventional wisdom in economics, temporary monopoly rights—patents—are necessary to give people incentives to come up with newer, better ideas. After all, if people who came up with new ideas could see those new ideas copied without cost by competitors, why bother spending the time and energy? Hence, we have patents.

But the conventional wisdom is wrong. In their 2008 book Against Intellectual Monopoly, economists Michele Boldrin and David Levine dropped a bombshell that will, I hope, overturn the consensus about rights to ideas. Using carefully developed theory and a host of real-world examples, they show how patents actually reduce, rather than encourage, innovation. Innovators like steam engine pioneer James Watt, devoted enormous amounts of time and energy to defending monopoly rights rather than to creating new value. Innovation and growth proceeded apace once the patents expired. In Boldrin and Levine’s opinion, this delayed the onset of modern economic growth.

As these authors argue, intellectual monopoly is an unnecessary evil. Further, it is a relic of medieval and early-modern mercantilist regulations whereby kings and nobles granted efficiency-reducing monopoly privileges to favored constituents. Eliminating intellectual monopoly would reduce the incomes of the intellectual monopolists, but it would unleash new creative energies throughout the economy.

In his recent book The Gridlock Economy, legal scholar Michael Heller argued that intellectual monopoly reduces the pace of innovation. He notes that innovative rap music, like Public Enemy’s initial work, was an early casualty of intellectual monopoly. Demands that artists pay royalties for borrowed music sharply restricted rap musicians’ ability to innovate.

While some people might not care about innovative rap music, many care about access to life-saving new medical technologies. Heller explains how this industry is particularly susceptible to the “tragedy of the anti-commons” created by intellectual monopoly. If an invention requires multiple patented innovations to be implemented, then every individual holder of one of the necessary patents can block further innovation. This slows the pace of economic progress.

Consider another example. Would Britney Spears’s artistic output fall if her intellectual monopoly rights were rescinded? I doubt it. Ms. Spears is much wealthier than she would be in the absence of intellectual monopoly, but her wealth is largely what economists refer to as economic rent: income in excess of her opportunity cost. Eliminating her intellectual monopoly very likely would not cause her to choose another occupation, but it would lead to an increase in net creative output.

Progress is also slowed by the regulation of food and drugs, which requires years of extensive and expensive testing before a drug can be approved for sale. This means that some lives are saved because people are restricted to hyper-safe drugs, but the lives saved come at the cost of lives that are lost because the appearance of these drugs on the market is delayed. Further, other drugs that would be useful but might carry greater risks never make it to the market to begin with.

carden_art_100.jpgWhite House Chief-of-Staff Rahm Emanuel suggested that the Administration should not waste the opportunities presented by the present economic and political crisis. Right now, the administration has the opportunity to make a bold move that will stimulate the
economy for generations to come. By eliminating intellectual monopoly and by liberalizing markets, we can encourage further innovation and greater prosperity.

Art Carden

Art Carden is an Adjunct Fellow at the Independent Institute in Oakland, California, and an assistant professor at Rhodes College (Department of Economics and Business).

Republished with permission from the Independent Institute.

Comments

  1. Chloe Davies says

    intellectual property is not really respected in most countries in asia where piracy is so rampant.*`~

  2. Joe Weinstein says

    Perhaps we need not get hung up (on either extreme) on intellectual ‘property’.

    In concept, at least in the USA over the last two centuries, both instruments of such property – patent and copyright (which should NOT be confused) – are LIMITED-TIME grants.

    PATENT is meant to grant exclusive limited-time rights for a working IDEA, in return for inventor’s disclosure of the idea to enable later perpetual public access and benefit.

    COPYRIGHT is meant to grant exclusive limited-time rights for an expressed FORM of ideas – not for the ideas themselves. This right is subject to the ‘fair use’ doctrine: the work may be quoted or reproduced, to the extent necessary to permit timely due critique of and heed to the work’s ideas, as indeed to other features of the work.

    Because of the time-limited feature, BOTH instruments of intellectual ‘property’ are therefore in concept much more like LEASE from the commons, rather than permanent material or real ‘property’ – i.e. enclosure of the commons.

    Les Antman is correct: opponents of entrenched intellectual property can quite reasonably use copyright, if only to protect their own work from hostile copyright. Moreover, in my opinion, an author who copyrights, with explicit encouragement to readers of fair use, achieves most of the desired aims – without some of the quirks – of the copyleft or creative commons approach.

    In concept, both instruments of ‘intellectual lease’ were meant reasonably to promote optimal tradeoff between two desirable aims, both intended to spur usable innovation: reward to innovators; and broad affordable convenient public use of the innovations.

    The devil is in the details – and in particular in the lease time periods. What should be obvious is that the initial reference lease times (patent 17, copyright 28 years) were intended for a society with much slower paces of technological, conceptual and artistic innovation, and much longer useful shelf lives for true innovations. Now, in the Internet age, these times arguably ought to be on the order of one month to 4 years – or less.

    What is now infuriating is that a few years ago Congress instead went to extremes in the other direction with copyright. Maybe the good news is that most greedy attempts by long-term copyright-holders to exploit Congress’ corrupt idiocy will flop. Likely we will instead get new faux innovations crowding out erstwhile more genuine ones. (Should ZYX Toys pay Disney decades of royalties just to make copies of Donald Duck? – when anyhow ZYX could more profitably promote and sell its own ‘innovation’ – say, Quentin Quack.)

  3. says

    @philo

    I hope that was just a lighthearted quip:

    1. Was it hypocritical for the owner of the Boston Red Sox to argue for abolition of the designated hitter rule while still using the DH in the games played by his team? Is it hypocritical to be a Canadian arguing against single payer health care and yet still go to a doctor when sick? Wanting to change the rules doesn’t mean you’re a hypocrite for living your life under the rules that exist.

    2. Does the logic of an argument depend on whether or not a particular advocate is a practitioner? Since the Boldrin/Levine book, which makes virtually identical arguments, is available for free online, might they deserve some attention instead of a casual dismissal?

    3. Many opponents of IP copyright their books in order to prevent others from copyrighting and restricting the material. They then explicitly grant a Creative Commons attribution license granting complete rights to reproduce with attribution. Some IP opponents use an identical approach and refer to it as copylefting their work. I believe Boldrin/Levine granted a CC license to every reader, and Heller might have done so as well (if not, see points (1) and (2) above).

    This is too important an argument to be dismissed for such a frivolous reason. Again, I apologize if you were just making a little joke.

  4. bea says

    Brad-

    My response to regarding Britney is this.

    She would likely produce more and better quality performances. She would also probably have more competitors of equal or better quality. What she makes is irrelevant.

    As a side note she would probably also be in a lot better mental/physical health right now and much of the crap she got herself into may never had happened. But hey, thats wishful thinking!

    *wink*

  5. rjk says

    Brad Parker,

    Why are you comparing physical property with intellectual ‘property’? They are not the same. Besides all culture/ideas are built upon the past. Therefore, the notion that any one person can claim ‘their’ work/idea is uniquely their own is nonsense.

    You say that “Protecting the rights to your property for a time is the most logical way to get humans to create.” This of course, seems quite obvious. Yet, I have yet to see research that proves this is so.

    In fact, anyone with an internet connection knows that such rights are not necessary for humans to create.

    Jamendo – over 20,000 Creative Commons licensed albums
    Flickr – over 100,000,000 Creative Commons licensed photos
    Wikipedia – over 2,800,000 english language articles

    A comparison between the database industries in Europe and the United States shows that database growth and innovation is thriving in the U.S. while not so much in Europe, even those Europe has more comprehensive copyright law for databases.

    The fashion industry thrives both creatively and financially despite no copyright.

  6. says

    I don’t know whether it is your inexperience or your naivete but making everything that comes from any individuals mind the property of all other individuals in a society is a failure of reason. It is a totalitarian fantasy. It is hardly progressive much less democratic. You say:

    Consider another example. Would Britney Spears’s artistic output fall if her intellectual monopoly rights were rescinded? I doubt it. Ms. Spears is much wealthier than she would be in the absence of intellectual monopoly, but her wealth is largely what economists refer to as economic rent: income in excess of her opportunity cost. Eliminating her intellectual monopoly very likely would not cause her to choose another occupation, but it would lead to an increase in net creative output.

    How would you even vaguely comprehend this equation? Are you a creator much less a performer? Obviously not. What merit does your argument hold when it comes from someone unfamiliar with the realities of the situation and why should I seek them out as an appraiser of intellectual property or creative worth?

    Let me put it another way. If I propose to you that your house or your car should also be public property under the guise of – it will improve housing and transportation – you would obviously throw a fit. Intellectual property is real property not make believe. Whatever you dream up is yours. Protecting the rights to your property for a time is the most logical way to get humans to create.

    If you still prefer your “open” ownership, I will make you an offer. You can republish and distribute all of my songs and essays when I can get the keys to your house and car. Fair is fair. Is it not?

Leave a Reply

Your email address will not be published. Required fields are marked *