From the Mises blog, Jan. 31, 2005. Archived comments below.
Cato, Lessig, and Intellectual Property
Now this is kind of interesting. In the Winter 2004-2005 issue of Cato’s Regulation, Thomas M. Lenard of the Progress & Freedom Foundation responded to a previous article in the same publication by Lawrence Lessig, Coase’s First Question, which apparently suggests, using purportedly Coasean reasoning (see below for more on this), that we should create a market for international trading rights. Lenard’s critique is sound, it seems to me:
Creating international trade rights creates an artificial scarcity where no real scarcity exists. That, by definition, is inefficient. In fact, such rights — quotas — have been used to protect domestic industries, with adverse effects on efficiency that are familiar to most economics undergraduates. Spectrum and broadband, on the other hand, really are scarce, which is why they need to be subject to a property-rights regime to be allocated efficiently.
Lenard’s reasoning would also apply to intellectual property rights, the point of which is exactly to artificially create scarcity (see my article Against IP, p. 24, for discussion of how IP creates artificial scarcity). Therefore, to the extent Lessig wants to reduce IP protection,1 he would actually be supported by the reasoning above. Interestingly, the libertarian Reason magazine once commented, “Lawrence Lessig is on the right side of this little spat with Cato’s Adam Thierer—and arguably the more libertarian side to boot.” (More on Thierer’s IP views in his article When Rights Collide: Principles to Guide the Intellectual Property Debate.)
So Lenard and Lessig seem to be on the right side of the IP issue, as opposed to Cato’s Thierer–and also Cato’s Michael Krauss, whose support for the artificial scarcity of IP led him to support measures that undermine genuine property rights (2, 3), such as the right to trade. (See also this comment about other unlibertarian positions of Thierer, such as opposing tax cuts.)
Aside: Lessig’s argument in favor of creating a market to sell, trade, and auction “the right to international trade” is, according to Lenard, based on a misreading of Coase. Lenard writes:
Citing Coase’s famous 1959 Journal of Law and Economics article on the Federal Communications Commission, Lessig argues that “proper-Coaseans” first ask the question of whether the resource in question should be the subject of property at all, before asking where the property right should reside. That is in contrast to “property-Coaseans” […], who go straight to the second question. Clever language aside, Lessig’s “proper-Coasian” concept is based on quoting Coase out of context. As Lessig indicates, Coase did write, “All property rights interfere with the ability to use resources. What has to be insured is that the gain from interference more than offsets the harm it produces.”
But the point he was making was that once property rights are defined, the market can bring about an optimum utilization of those rights. Coase was not suggesting the need to subject every property rights decision to an ex ante cost-benefit analysis to determine “whether the resource should be the subject of property at all.” That would be a pretty radical notion, indeed.
Well, Lenard is no doubt correct that if this is how Lessig argues, he is incorrect. However, if Lessig has been mislead by Coase, I’m not so sure it’s because Lessig is misconstruing Coase: as Walter Block, e.g., has argued (see, e.g., the various articles by Block under the heading “Ronald Coase and Social Cost” on his Publications page),
We see, therefore, that the justification of a particular set of rights at any given time for Coase is that they maximize wealth. When they stop attaining this goal, they must be altered and abolished, and a new ownership pattern set up in their place. This is, of course, the reverse of the traditional theory based on the Lockean homesteading principle. There, property rights are the basic bedrock of the system, and wealth maximization is predicated on them.
So can Lessig really be blamed if he is led astray by Coase? For further critiques of Coase along related lines, see Hoppe, Chicago Diversions,2 and Gary North, Undermining Property Rights: Coase and Becker.
February 1, 2005 at 11:20 am-
The problem is that any property right is “artificial” in the strict sense and creates scarcity. If you own a piece of land, I may not use it without your permission (even if doing so does not damage it or deprive you of use). I cannot “borrow” items in your open garage even if you don’t use them or even take care of them. I must get my own. But the theory is that land will be developed and tools and other items will only be produced if they can be owned and the ownership enforced and transferred.
IP is not different in this. It is possible that we cannot create proper laws today, but it seems that the discussion is either about the existing corrupt system that enforces too many or too few rights (generally corporatist), and no protection. And I would note creative commons and opensource rely on copyright to keep things from being stolen from the commons.
Property laws don’t prevent trespassing, only allow damages or other sanctions when it occurs and becomes bothersome enough to take to court. And there are easements and other parts of the law so it cannot be tyrannical.
There is probably a balance where IP can be “owned” for a time by the authors where it would maximize the number and quality of inventions and artistic works. But both the goal and the means seem to be lost in the arguments.
February 1, 2005 at 4:24 pm-
Scarce resources are scarce by definition; this feature of their nature is true with or without legal recognition. Property rights simply state which person, out of many that do or could claim the resource, has the exclusive right to use it. Therefore, property rights do not create scarcity at all. They simply specify who the owner is.
With, or without, property rights, a given scarce resource can only be used by one person. That is why it is scarce. Without property rights, that person is random, or the strongest, or whatever; or people use it only until it is taken; or several people fight over it; or people leave it alone and don’t use it because they know that it might be taken from them before the project is completed. With property rights, one person is identified from the throng who has the right to use it. In none of these cases is there any artificial scarcity created.
“If you own a piece of land, I may not use it without your permission (even if doing so does not damage it or deprive you of use). I cannot “borrow” items in your open garage even if you don’t use them or even take care of them. I must get my own.”
Yes, but without property rights, I would not be able to use the land as I see fit (ie.,e keeping you off of it), rather, you would be the one who coulde decide to borrow it. Under a non-property regime, there is no specified owner; who is the user at any time is luck of the draw or based on naked power. Under a property regime, it’s clear who the owner is, and what the rule that names owners is based on (first-user, under libertarian property rules). In neither case is there more or less scarcity, or any artificial scarcity.
“But the theory is that land will be developed and tools and other items will only be produced if they can be owned and the ownership enforced and transferred.”
No, that is the utilitarian, wealth-maximization view. The principled case for property rights is that it is the only way to permit resources to be used peacefully and productively: to objectively and justly assign each resource to an identifiable owner. We do this with the obvious solution: when there is a conflict, the person with the better claim is the owner. Obviously, as between an earlier possessor and a later possessor who took it from the earlier possessor, the earlier has the better claim (because even the later possessor must implicitly adopt the rule that the current possessor–namely, himself–has a better claim than latecomers, otherwise he would not be able to retain it).
“IP is not different in this.”
Yes, it is. First, based on the principled case for property, you cannot have IP, since real property works by assigning property rights where there is already scarcity; and IP generates scarcity thereby in effect redistributing real property from homesteaders who have used the property to innovators far away who merely think of ways to use other property. Even under the wealth-maximizing rationale, it is clear that a property regime for scarce resources does promote productivity; but it is nothing like clear for IP.
“It is possible that we cannot create proper laws today, but it seems that the discussion is either about the existing corrupt system that enforces too many or too few rights (generally corporatist), and no protection.”
Advocates of “fixing” the IP system never seem to be able to advocate even the general contours of the ideal system they favor, that also avoids the defects of the real system. Interesting.
February 2, 2005 at 9:53 am-
“Scarce resources are scarce by definition; this feature of their nature is true with or without legal recognition. Property rights simply state which person, out of many that do or could claim the resource, has the exclusive right to use it.”
The act of giving someone a exclusive property right is in fact a “creation of artificial scarcity”. Since most people -particularly nowadays- have so much physical property, they cannot all use them at once. If you are in your house you can’t be in your car and vice versa. Thus any property rights which implies that anyone can deny others access to it when he or she don’t use it. All property except that in your physical body (at least the vital parts of it) can be separated from you and based on the phony scarcity criteria all you could have is a right to be first in line to use it if others want it simultaneously.
As you understand the end of right to exclusion of unused property would mean a end to the capitalist system and instead imply a socialist order. Which is not surprising since the focus on scarcity as the defining issue as to whom will hold something is a principle equivalent to the Marxist view of “each according to his need”.
That is why capitalist propery rights have never had anything to do with that principle but instead have been based on who created something, not whether or not it creates artificial scarcity.
“Yes, but without property rights, I would not be able to use the land as I see fit (ie.,e keeping you off of it), rather, you would be the one who coulde decide to borrow it. Under a non-property regime, there is no specified owner; who is the user at any time is luck of the draw or based on naked power. Under a property regime, it’s clear who the owner is, and what the rule that names owners is based on (first-user, under libertarian property rules). In neither case is there more or less scarcity, or any artificial scarcity.”
Of course there is more “artificial” scarcity if you deny others the right to use it even though you don’t.
“First, based on the principled case for property, you cannot have IP, since real property works by assigning property rights where there is already scarcity; and IP generates scarcity thereby in effect redistributing real property from homesteaders who have used the property to innovators far away who merely think of ways to use other property”
You’re contradicting yourself now since you just wrote that one of the possible uses of property is keeping others from using it even as you don’t use it. But this is of course the same as with IP as IP implies the similar right to keep others from using it.
- February 2, 2005 at 2:05 pm
-
“You’re contradicting yourself now since you just wrote that one of the possible uses of property is keeping others from using it even as you don’t use it. But this is of course the same as with IP as IP implies the similar right to keep others from using it.”
One use of my property that I own may be to have it lie idle for a while. That means that if that is my wish, but someone else actually uses it, then I am not to that extent the owner; rather, the other user is.
You are conflating possession with ownership. They are different.
- See Let a Thousand Googles Bloom. [↩]
- from “The Ethics and Economics of Private Property,” in The Great Fiction [↩]
{ 4 comments… read them below or add one }