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Tabarrok: Patent Policy on the Back of a Napkin

In a recent post, Patent Policy on the Back of a Napkin, Alexander Tabarrok makes a Laffer-curve style “argument” that patent rights are currently “too strong.” Of course, he is correct that patent rights are too strong. But there are so many problems with his position.

Here Tabarrok is implicitly adopting a wealth-maximization/utilitarian approach to policy. There are several problems with this, as I detailed in Against Intellectual Property. For one, it assumes that values are cardinal and interpersonally comparable, even though they are not. And it assumes that if a given policy helps A more than it hurts B, this is justified. But this is false; it does not follow that it is justified  to violate B’s rights just because A feels some more intense joy greater than B’s pain. Also: there is no evidence anyway that patent policy produces any kind of net societal gains at all. This should be evident from Tabarrok’s ridiculous Laffer-curve of innovation vs. patent strength, which has no numbers associated with it; it’s pure academic whim. (For more criticism of the Laffer curve approach and its application to IP, see  Rothbard’s evisceration, and my post Obama Transition Team Member on “Optimizing” the Patent System, in which I mentioned “the Laffer Curve of Patents”.) Further, such an unprincipled, utilitarian approach leads to other unlibertarian ideas, such as Tabarrok’s proposal that the state  take tens of billions of dollars from taxpayers and award it to people it deems “innovative”, to encourage innovation (see my post $30 Billion Taxfunded Innovation Contracts: The “Progressive-Libertarian” Solution).

As for numbers: the Founders adopted a quasi-empirical case for patents in 1789,1 but never backed it up with any empirical studies. It was just their “hunch” that allowing the new centralist federal government to grant monopoly privileges (copyright and patent) might “generate” more gain than the system costs (see There’s No Such Thing as a Free Patent). But they had no proof of this. And guess what? In the 200+ years since, no one has come up with any. For example, Austrian economist Fritz Machlup, in a Congressional study in 1958, concluded:

No economist, on the basis of present knowledge, could possibly state with certainty that the patent system, as it now operates, confers a net benefit or a net loss upon society. The best he can do is to state assumptions and make guesses about the extent to which reality corresponds to these assumptions. … If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one.”2

And in a recent study, economists Michele Boldrin and David Levine, authors of Against Intellectual Monopoly, conclude:

The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity, unless the latter is identified with the number of patents awarded—which, as evidence shows, has no correlation with measured productivity.3

Yet we have people like Tabarrok confidently concluding that there is a “Laffer curve” in the “balance” between patent “strength” and “innovation.” Technocrats like Tabarrok are talking utter nonsense, and they must know it. There is no “evidence” for their empirical case for some patent protection whatsoever, even if we magnanimously forget the huge and insurmountable ethical and methodological difficulties with their whole empirical, positivist, utilitarian, wealth-maximizationalist unprincipled approach.

Tabarrok’s curve is flawed. The correct diagram is obvious: it should slope monotonically downward to the right: the more IP “strength,” the less economic freedom, competition, property rights, and innovation.

Tabarrok’s tentative sally against maximalist patent rights (i.e.: state-granted anti-competitive monopoly privileges) is attacked by an Objectivist influenced economist, Geoffrey Manne, under the influence of the waning pro-IP approach of Objectivists like Adam Mossoff (see The anti-patent crowd seems to think your smartphone doesn’t actually exist).

For my previous criticisms of Tabarrok’s half-baked comments on IP law—in which he strives to appear as a radical or maverick for favoring tepid IP “reform” while doing the “responsible” thing of favoring “reasonable” laws (read: legislated dictates of a criminal federal mafia), see Tabarrok’s Launching the Innovation Renaissance: Statism, not renaissance).

Bottom line: it is good that some people think we should reduce patent rights. But they are wrong to be half-hearted about it—to say that we should “reform” the law, but that some patent grants by the central state are necessary. Proponents of the free market who favor monopoly privilege grants by a bureaucratic agency of the criminal central state—and in the name of “property rights,” no less—are deeply confused about the nature of property rights and free markets.

  1. The American Founders who put the IP clause into the US Constitution in 1787 did not think of IP rights as natural rights, nor did Locke. As Professor tom Bell writes, “To the contrary, they evidently viewed copyright as a policy tool, one aimed at promoting the progress of science and useful arts. They begrudged copyright’s interference with natural and common law rights, like the government they formed, as a necessary evil.” See my post Locke on IP; Mises, Rothbard, and Rand on Creation, Production, and “Rearranging”. []
  2. See Fritz Machlup, An Economic Review of the Patent System 79-80 (1958), quoted in my post The Economist on the American Patent System. []
  3. Boldrin and Levine: The Case Against Patents. []
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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.