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Economic Freedom of the World Rankings and Intellectual Property: The United States’ Bad Ranking is Even Worse Than Reported

Update:

IP shill Dale Halling:

 Dale B. Halling October 3rd, 2012 4:24 pm

This anti-patent attitude by the press should not be viewed in isolation, they are also anti-property, anti-free enterprise, and anti-reason. It has been shown over and over again that they have no interest in the truth.

Mr. Computer Science does not understand Free Enterprise, property rights, or history. Computer science took off when patent protection was strengthened for software. As for Patents being a monopoly, CS has no idea what he/she is talking about. First of all the patent statute states that patents are personal property. Second of all, a monopoly is a right to a market. All property rights give you the right to exclude. A patent does not even give you the right to make or sell something, so it cannot be a monopoly. Third, patents are granted for the reason all property rights exists, because the owner created something.

There is absolutely no empirical evidence that countries are better off without a patent system. If you look at the Fraser Institute or the Wall Street Journal/Heritage Foundation surveys of economic freedom, you will see the richest countries and the most economically free countries have the strongest patent systems. Those countries in the lowest 20% do not innovate, and do not have a wide dispersion of technology and live on the edge of starvation. The fact is the most innovative countries and those with the widest dispersion of new technologies and the wealthiest are those countries with strong patent systems. None of this would be possible if there was even a shred of logic behind the anti-patent arguments. The reason this occurs is that property rights encourage the creation, investment, and dispersion of new technologies.

Update: My assumptions in the post below appear to be in error, or at least not sufficiently provable. Communication from one of the authors of the study has told me that the property  rights component the study has used for a decade has nothing explicitly referring to IP.  Apparently for years, the previous wording has been replaced  with a general survey question on “property rights.”  Apparently, depending on how respondents feel about IP, it may or not not influence their answers. The author assures me that there are survey questions in the same source explicitly about IP that the study does not not use.  He further points me to the data Appendix to Chapter 1 which explains precisely how each component in the index is calculated, and that this is true for all  42 of the components. The component on property rights is 2-C  and the section below is directly from that Appendix:

C  Protection of property rights

This component is from the Global Competitiveness Report question: “Property rights, including over financial assets, are poorly defined and not protected by law (=1) or are clearly defined and well protected by law (=7).”  Note: This replaces previous Global Competitiveness Report question on protection of intellectual property.

Source: World Economic Forum, Global Competitiveness Report (various issues), http://www.weforum.org/en/initiatives/gcp/index.htm.

Thus, this says that the general question about property rights replaces an earlier one that did refer to IP; but that question has not been used for at least a decade, according to the author I discussed this with.

It appears that the current study does not explicitly emphasize IP. I still suspect that the stronger a country protects IP, the more it will give it a stronger property rights rating in surveys since most people surveyed no doubt think IP is a legitimate type of property right. But given the information noted above, it’s hard to be certain. In my view, a country should receive strong negative marks against economic freedom, for having strong patent and copyright protections, just as it should receive demerits for having other forms of state-granted monopolies and anticompetitive, protectionist measures like tariffs and the like.

***

My original post:
As reported on Economic Freedom, the US has fallen in economic freedom rankings “from second in 2000 to eighth in 2005 and 19th  in 2010 (unadjusted ranking of 18th)”.

Economic Freedom of the World: 2012 Annual Report

Earlier today, the Fraser Institute released its “Economic Freedom of the World: 2012 Annual Report.” Analyzing data from 144 countries based on 42 distinct variables, the study’s authors rank countries according to their relative level of economic freedom.

After ranking 2nd in 2000, the U.S. falls to 18th in this year’s report. As the authors explain:

“[T]he United States has fallen precipitously from second in 2000 to eighth in 2005 and 19th  in 2010 (unadjusted ranking of 18th). By 2009, the United States had fallen behind Switzerland, Canada, Australia, Chile, and Mauritius, countries that chose not to follow the path of massive growth in government financed by borrowing that is now the most prominent characteristic of US fiscal policy. By 2010, the United States had also fallen behind Finland and Denmark, two European welfare states. Moreover, it now trails Bahrain, the United Arab Emirates, Estonia, Taiwan, and Qatar, countries that are not usually perceived of as bastions of economic freedom.”

The Fraser Institute’s full report is available below and on the Economic Freedom Network website.

(See also Michael Tanner, America’s Vanishing Economic Freedom.)

The United States has the worlds most draconian patent and copyright regimes. Since these forms of so-called “intellectual property” are counted as types of “property” (see, e.g., the Fraser Institute, “Country Audits,” which indicates that “[e]conomic freedom measures” include “the impartiality of legal systems to protection of intellectual property”), the US no doubt is ranked higher than it ought to be since it is getting points for its aggressive IP system, rather than being dinged for it, as it should be. In other words, the US is really lower than 19th.

The Fraser Institute ought to recognize that intellectual “property” is not a legitimate type of property, and that its enforcement makes legitimate property rights more insecure. The stronger a given IP system, the more the country should be moved down the ranking system. No doubt Fraser thinks it’s being neutral by just accepting whatever state legislative schemes are labeled “property”, but it is impossible to be neutral. Accepting a given law as a type of property right takes a normative and economic position about it: by including IP in the measure of a country’s protection of property rights for this study is to say that IP is a good thing, is a legitimate property rights, and contributes to “economic freedom.” Imagine if some country still had chattel slavery in place, with human slaves recognized as property. Should its strong enforcement of runaway slave laws be counted as a positive in terms of its having economic freedom and a strong property rights system? I think not. And the same with IP. IP restricts economic freedom and competition, and violates property rights.

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To the extent possible under law, Stephan Kinsella has waived all copyright and related or neighboring rights to C4SIF. This work is published from: United States. In the event the CC0 license is unenforceable a  Creative Commons License Creative Commons Attribution 3.0 License is hereby granted.