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Letter from a UK Grad Student

Below is my (lightly edited) reply to an email I received this morning from a UK grad student in economics. One brain at a time. Only 6.999 billion to go.


[K], thanks for your nice note. I’m glad you are thinking about these things and having some breakthroughs. This is not an easy issue for people since the idea of IP is so ingrained in our culture and law.

I suggest you start with the resources listed at www.c4sif.org/resources. That should address some of your remaining questions. And if you are in economics then I highly recommend you look into the works of the Austrian school, for what might be an eye-opening approach to your entire discipline. There are a large number of works at www.mises.org but I would suggest you take a look at Mises’s Ultimate Foundation of Economic Science, Hoppe’s Austrian Science and the Economic Method and his A Theory of Socialism and Capitalism, and perhaps Rothbard’s What Has Government Done to Our Money. All these are available free online at Mises.org and Hoppe’s are additionally available at www.hanshoppe.com (which I run).

And see inline below.

On Thu, Feb 9, 2012 at 11:21 PM, [K] wrote:

Dear Sir,

my name is [K] and I’m a graduate Economics student at [a UK university].
I have been intuitively against IP for some time now, with some examples of the absurdities that patents lead to at the back of my head, but I had never really got down to reading up on it.
Only today’s insomnia made me start researching the issue. I immediately came across your talks on Youtube.
Then I went to google scholar and… bang! ALL the articles (on the issue) that came up on the first page of search results found that there is no significant impact of patents on innovation. I’m actually struggling to find any empirical evidence that supports the standard IP argument.
There is none and the IP lobby does not even try to prove this. They just assert it’s obviously true as a matter of faith. The studies are either inconclusive/ambiguous or they indicate that patents harm innovation. http://blog.mises.org/10217/yet-another-study-finds-patents-do-not-encourage-innovation/
I mean.. how much more obvious does it have to get for people to become actively interested in it?! From what you’ve said here: http://www.youtube.com/watch?v=cWShFz4d2RY&feature=player_embedded#! it appears that even large corporations come across problems because of IP so how can we possibly still be stuck in this viscious circle??
Part of the problem is most people accept the labor theory of value, so they are all confused about the whole basis of value, property, and rights. This issue confused even Locke, who threw in the unnecessary step about labor. And then it contaminated and infected Marx and economics. And it gives rise to the IP idea because it leads people to erroneously think that creation is a source of property rights: if you “create” some “thing” that has “value” (or as Randians say, if you “create a value,” whatever this means; as if value is a noun, a thing, instead of a preference or assessment of an actor, with respect to a thing, demonstrated in action), by mixing your labor etc., then you own the resulting “thing” you created, whether it’s tangible or whether it’s intangible. They do not stop to think that we do not own labor; labor is just an action you perform with your body. You own your body and that’s sufficient to let you do what you want with it. It’s double counting to say you also own your labor, as if it’s some ownable substance. When you labor to produce some useful good, you are just transforming raw materials into a more valuable configuration or arrangement. This creates wealth, but it does not create a new property right, since you had to already own the input factors to labor on them and transform them. You own the raw materials you appropriate (homestead) that were previously unowned not because you own your labor, but because you were first, and that means you have a superior claim to everyone else, who compared to you are latecomers. So original appropriation does not require the confused Lockean assumption of labor ownership. And you own produced goods that you labored on not because you own your labor but because you already owned the original materials that you have rearranged. Labor is not owned, and is not why we own things. Creation is not a source of rights either, since we cannot create matter we can only find it when it is unowned, and then use our knowledge and labor to transform it into more valuable shapes (thus creating wealth but not any new property rights). The entire way of thinking about labor is the grand mistake in both political theory and economics. It needs to be ripped out of Lockean homesteading and political theory, leaving no room for modern rights-based arguments for IP.

But the second reason I think is that larger companies do benefit from patents. Yes, it adds a cost to their operations, but it’s kind of a wash: sometimes they get money from a competitor, sometimes they have to pay (as in the smartphone patent wars raging now — just google this term on c4sif.org). But more importantly than that, it protects these larger, more entrenched industries from smaller companies and upstarts and new competition, since the smaller companies cannot afford to engage in the patent wars and don’t have the large patent arsenals. So it serves as a barrier to entry and protection from competition. It creates oligopolies. That is why they push for patents to continue. See various posts such as http://c4sif.org/?s=oligop . This is also why big business has always been behind regulations like minimum wage etc.–it harms them less than smaller companies, so it acts as a protection from competition. When you hear big business interests complain about such regulations these are just crocodile tears; it’s like saying “don’t throw me into the briar patch, please!” See e.g. http://blog.mises.org/14623/state-antitrust-anti-monopoly-law-versus-state-ip-pro-monopoly-law/

In the case of copyright most artists are not helped one bit by copyright. The top 0.5% may be, like JK Rowling and Stephen King and Madonna. But most people-no. In fact most are harmed by having their creative freedom hampered–they are limited in what remixing and extending etc. they can engage in. And they often have no choice but to sign away their rights to big content companies, since this entire edifice has arisen as a result of the economic consequences of the copyright monopoly on information. So the main beneficiary of copyright is the music, movie, and publishing industries, since it perpetuated their gatekeeper role which actually originated in the 1400s with attempts to censor and control the publication of books in the wake of the printing press.

A further point that I think needs emphasizing in the context of IP and limitations it imposes is the benefits of opennes and massive collaboration. The idea of crowdsourcing is still under-explored and there are great examples of its potential, for instance the Polymath Project http://en.wikipedia.org/wiki/Polymath_project#Polymath_Project .
anyway, i have just discovered your writings and will proceed to familiarising myself with them.
I just wanted to say that you have re-ignited my interest in Economics and inspired me tremendously. Thank you!
If you ever happen to be around in the UK, I would very much welcome the opportunity of buying you a coffe (or a fine ale). I will definitely enroll in your next online course on IP if there is one.
Thanks–and the last one is online, as are my 3 other Mises Academy classes: they are all listed at stephankinsella.com/media
Also, I’m thinking about writing an article on the issue for a polish newspaper. This knowledge definitely needs to be popularized!
Some of my stuff is already in [that language]–take a look here.

All the best, Stephan

Best wishes
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