Tucker is spot-on here. Take the title: “Knowledge Is as Valuable as Physical Capital” — actually this is what IP proponents say, they say that knowledge is as important as physical goods and therefore you need property rights in ideas just as we need it in physical things. Tucker turns it on its head and say that both knowledge and capital are important and therefore the state should not attack either: it should not tax and regulate or collectivize private capital, and it should not restrict the generation and flow and use of knowledge by IP law:
“It harms prosperity and future progress to attack private capital. In the same way, it harms prosperity and future progress to restrict information flows and their uses, through whatever means: censorship or intellectual monopolies.”
See also my
- “Intellectual Freedom and Learning versus Patent and Copyright,”
- KOL062 | “Intellectual Freedom and Learning versus Patent and Copyright” (2010)
- Rothbard on the Main Fallacy of our Time: Marx’s Labor Theory of Value
One of the greatest errors made by opponents of free economies is to disparage and attack the idea of private capital. Without capital, production is only about immediate consumption, not about building for the future. You cannot have a complex economy with advanced technology, rising wages, and many stages of production, in the absence of capital, which requires security in private property.
This is why even today you find very poor countries around the world. What has gone wrong? People are not lazy, unenterprising, uncreative, or unambitious. On the contrary, people in poor countries work harder and longer—even more creatively—than people in developed economies. What’s missing is that crucial thing: security in the cumulation of capital, intended to provide for future consumption. If you look carefully, what you find is that the state steals it (there is always some excuse) before it can be employed for social uses.
Capital Alone is Not Enough
And yet, more is required for rising prosperity. You must also have the advance of knowledge and the opportunity to act on ever better information about the world. How important is that? F.A. Hayek argues that it could be more important as private capital, owing to the special nature of knowledge itself.
In the Constitution of Liberty, he writes:
The growth of knowledge is of such special importance because, while the material resources will always remain scarce and will have to be reserved for limited purposes, the uses of new knowledge (where we do not make them artificially scarce by patents of monopoly) are unrestricted.
Knowledge, once achieved, becomes gratuitously available for the benefit of all. It is through this free gift of the knowledge acquired by the experiments of some members of society that general progress is made possible, that the achievements of those who have gone before facilitate the advance of those who follow…
All the conveniences of a comfortable home, of our means of transportation and communication, of entertainment and enjoyment, we could produce at first only in limited quantities; but it was in doing this that we gradually learned to make them or similar things at a much smaller outlay of resources and thus became able to supply them to the great majority.
A large part of the expenditure of the rich, though not intended for that end, thus serves to defray the cost of the experimentation with the new things that, as a result, can later be made available to the poor. The important point is not merely that we gradually learn to make cheaply on a large scale what we already know how to make expensively in small quantities but that only from an advanced position does the next range of desires and possibilities become visible, so that the selection of new goals and the effort toward their achievement will begin long before the majority can strive for them.”
Let’s unpack this a bit. Hayek’s much-welcome side-eye toward “intellectual property” is exactly right. Copyrights, patents, and even trademarks as we know them all extend from government legislation. They are designed to stop information flows by penalizing the use of valuable knowledge. They necessarily hinder progress for that reason, as is obvious by looking, for example, at the uses of software patents. They create information monopolies enforced by the state.
In contrast, a free market creates what Hayek calls a “fund of experience”—an analogy to capital theory in the physical world. With this fund, the entire world and the whole of history can benefit from the success of one single firm or one innovator.1
See also Bastiat:
Thanks to its action every productive force, every improved technique, every advantage, in a word, other than one’s own labor, slips through the hands of its producer, remaining there only long enough to excite his zeal with a brief taste of exceptional returns, and then moves on ultimately to swell the gratuitous and common heritage of all mankind. All these discoveries and advantages are diffused into larger and larger portions of individual satisfactions, which are more and more equally distributed. Such is the action of competition.
See also the related comments about Mises and his views on possession vs. ownership, catallactic vs. juristic ownership, and so on, in Legal Foundations of a Free Society (Houston, Texas: Papinian Press, 2023), p. 276, the section “Economic vs. Normative Realms of Analysis: Ownership vs. Possession” (p. 277 n.35, ) and Kinsella, KOL274 | Nobody Owns Bitcoin (PFS 2019), slides 9–10. Also in Libertarian Answer Man: Self-ownership for slaves and Crusoe; and Yiannopoulos on Accurate Analysis and the term “Property”; Mises distinguishing between juristic and economic categories of “ownership” (also Intellectual Property Discussion with Mark Skousen):
Mises elaborates in Socialism:
“Regarded as a sociological category ownership appears as the power to use economic goods. An owner is he who disposes of an economic good.
“Thus the sociological [i.e., economic] and juristic concepts of ownership are different. This, of course, is natural, and one can only be surprised that the fact is still sometimes overlooked. From the sociological and economic point of view, ownership is the having of the goods which the economic aims of men require. This having may be called the natural or original ownership, as it is purely a physical relationship of man to the goods, independent of social relations between men or of a legal order. The significance of the legal concept of property lies just in this — that it differentiates between the physical has and the legal should have. The Law recognizes owners and possessors who lack this natural *having*, owners who do not have, but ought to have. In the eyes of the Law ‘he from whom has been stolen’ remains owner, while the thief can never acquire ownership. “Economically, however, the natural having alone is relevant, and the economic significance of the legal should have lies only in the support it lends to the acquisition, the maintenance, and the regaining of the natural having.”
Ownership means full control of the services that can be derived from a good. This catallactic notion of ownership and property rights is not to be confused with the legal definition of ownership and property rights as stated in the laws of various countries. It was the idea of legislators and courts to define the legal concept of property in such a way as to give to the proprietor full protection by the governmental apparatus of coercion and compulsion, and to prevent anybody from encroaching upon his rights. As far as this purpose was adequately realized, the legal concept of property rights corresponded to the catallactic concept.
I hasten to add that Mises’ views here, while complementary to those I express above, do not imply that my views, or even Mises’s, are non-normative, legal positivist, or “might makes right,” but it would take me too far afield to go into this here.
It harms prosperity and future progress to restrict information flows and their uses.
This free gift of knowledge is what might be called the “socialist” side of capitalism. Every private producer, in order to market its wares, must necessarily “give away” that most precious thing, the evidence of its own success. That evidence, that knowledge, the recipe and technique concerning market successes, becomes part of the commons. That thereby inspires competitors to emulate the success. The profitable producer must, in turn, stay on the path of change and progress and never rest, and generate ever newer and better knowledge.
So we see here how Hayek anticipated the great trend of our time, the steady and inexorable move of more and more of our commercial lives, from the realm of scarce goods to the realm of the non-scarce: words, images, movies, physical objects with 3d printing, and now even money.
It harms prosperity and future progress to attack private capital. In the same way, it harms prosperity and future progress to restrict information flows and their uses, through whatever means: censorship or intellectual monopolies.
This is all about the scalability, malleability, indestructibility, and immortality of ideas as a non-scarce good. Information is gratuitously available for the benefit of all, and this of course is what the market “desires” in effect: the inclusion of the whole of the world’s population and resources in the great process of improving our lives in this world in which scarcity will always and forever be a feature—a feature to be dealt with realistically (and humanely) and also to overcome insofar as we are able.
- Update: Re the “fund of experience” notion: see also Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948), discussing scientific discoveries which add to the “storehouse of knowledge of all men”; also discussed in Elizabeth I. Winston, “The Technological Edge.” See also “Against Intellectual Property After Twenty Years: Looking Back and Looking Forward“, at n43.: “For elaboration, see Kinsella, “Hayek’s Views on Intellectual Property,” C4SIF Blog (Aug. 2, 2013) and “Intellectual Property and the Structure of Human Action,” discussing Hayek’s comments about how the accumulation of a “fund of experience” helps aid human progress and the creation of wealth.” [↩]