Bryan Caplan’s view on Slavery Contracts and IP

by Stephan Kinsella on April 28, 2019

The non-Austrian economist¹ and libertarian² Bryan Caplan weighed in on the IP (intellectual property) issue in 2006. He writes:

A Nice Statement of My Position on IP

17

By Bryan Caplan

Some economists would argue that any contracts voluntarily entered into should be enforced. That is what lead them to argue that, if I agree not to redistribute your book, then I should be bound by that agreement. In this view, the copyright law simply codifies the contract that sellers of embodied ideas would wish to bind their buyers to, and so saves on private transaction costs.

What do Boldrin and Levine have to say against the view that they have so aptly summarized? They make an analogy to the ban on slavery contracts, and say that this is “not only a ‘morally just’ prohibition, as many economists have argued, it is also an economically efficient one.”

For starters, I don’t see what the moral or economic problem with a slavery contract is supposed to be. Boldrin and Levine just assume the reader will agree that a slavery contract is morally offensive. Their economic case mostly consists in pointing out some disadvantages of slavery-like contracts, without giving due credit to the compensating advantages that lead such contracts to be signed despite their drawbacks.

But suppose you share the widespread view that slavery contracts are just wrong and should not be allowed. Question: Doesn’t it have something to do with the fact that a person is ceding everything they will ever have – or at least a high fraction thereof – to another person, AND will have no easy way to back out? Would you have a moral problem with a five-minute slavery contract? What if you could cancel your five-minute slavery contract for a $1 fee?

That’s about how onerous the typical copyright is. A contract not to copy the Hero System Fifth Edition core rulebook is at worst a petty inconvenience, not a daily albatross around my neck. And if I did feel oppressed, I could always sell the book, or just burn it, and I’d once again be free as a bird.

A few preliminary points.

First, Caplan muses “I don’t see what the moral or economic problem with a slavery contract is supposed to be” seemingly unaware of the long literature of arguments, both libertarian and otherwise, against slavery contracts. It might have been helpful to have been aware of this. And he builds his argument on the intersection of contract and IP. To talk intelligently about slavery contracts one might want to have a libertarian-informed theory of contract and inalienability to draw upon. (See my A Libertarian Theory of Contract: Title Transfer, Binding Promises, and Inalienability, Journal of Libertarian Studies 17, no. 2 (Spring 2003): 11-37 and Inalienability and Punishment: A Reply to George Smith, Winter 1998-99, Journal of Libertarian Studies.)

Moreover, Caplan reverts only to a few offhand comments by a couple of mainstream economists about IP. It might have been helpful to have been aware of the existing libertarian case against IP, which was already well known before 2006. Caplan was obviously not familiar with it, merely citing a couple of non-libertarian, empirical economists, Boldrin & Levine (who went on to write the influential Against Intellectual Monopoly, Cambridge 2008; see also their Boldrin and Levine: The Case Against Patents). The key libertarian anti-IP works published already and well before 2006 are:

Wendy McElroy, Contra Copyright, Again [originally published 1985]
Samuel Edward Konkin III, “Copywrongs,” The Voluntaryist (July 1986) (LRC version)
Tom Palmer, “Intellectual Property: A Non-Posnerian Law and Economics Approach“, Hamline Law Review, Spring 1989
———, “Are Patents and Copyrights Morally Justified? The Philosophy of Property Rights and Ideal Objects“, Harvard J. Law and Public Pol’y, Summer 1990
Roderick Long, The Libertarian Case Against Intellectual Property Rights, Autumn 1995 issue of Formulations
Kinsella, Against Intellectual Property, Journal of Libertarian Studies (Spring 2001)

But back to Caplan’s “nice statement of his views on IP,” which cites only the embryonic work of Boldrin and Levine, seems unaware of other libertarian work on IP, and seems unaware of any issues with the enforceability of voluntary slavery contracts. The impression he leaves is that he is in support of IP, because he’s in support of copyright law, which is because he’s in favor of enforcing contracts (maybe even slavery contracts). I.e., he equates copyright with IP and equates contract enforcement with copyright.

There are several problems with the entire chain of reasoning. First: Caplan doesn’t mention patents at all. Supporting “IP” implies you support all types of IP—patents, copyright, trademark, trade secret law, and related types of IP such as defamation (libel and slander) law, semiconductor maskwork protection, “moral rights,” personality rights, database rights, and perhaps more modern forms of IP such as the “right to be forgotten” on websites or online search engines or databases.

And coming up with a sketchy contractual argument for copyright doesn’t justify the other types of IP.

As for trying to justify copyright by contractarian reasoning, but somehow not patent, which is what Caplan seems to be roughly trying to do—consider the illustrative case of Rothbard’s (miserably failed and confused) attempt to do something similar. For example, in “Knowlege, True and False“, Rothbard correctly argues against defamation law and reputation rights (which argument also would apply to the “reputation rights” aspect of trademark law, but Rothbard didn’t seem to realize this). But he goes astray in trying to make an argument for “contractual” or “common law” copyright, while opposing patents, as I explain in detail Against Intellectual Property. Rothbard opposes IP, without realizing it, in his argument against defamation. And as noted, this should have led him to oppose trademark law too. He also distinguishes between patent and copyright, opposing the former (see Man, Economy and State, ch. 10, §7; Power and Market ch. 3, §3.N), but endorsing the latter which he calls “common law” copyright, based on contractual arguments and some bizarre “implicit theft” argument. There are innumerable problems with this entire argument; frankly, it’s just a mess.

First: common law copyright is already a term that referred to a hodge-podge of doctrines such as the right of an author to be the first to publish a previously-unpublished work, but which have basically been superceded and preempted by modern statutory copyright. It does not mean “contractual relationships related to published works,” as Rothbard seems to mean it. So his terminology is misleading.

Second, the example Rothbard gives is that of a mousetrap, i.e. an invention, which is the subject matter of the patent system, not the copyright law. So is Rothbard for patents, or not? He said he was against patents in MES and Power and Market, but he implies he is for patents in Ethics of Liberty (by including “inventions” in his “common law copyright” idea). He was very confused on this issue.

Third, his argument is based on the “reservation of rights” notion, which is based on the idea of property as a “bundle of rights.” The inventor only sells the mousetrap to the customer, but “reserves” the “right to copy.” Thus, the buyer simply doesn’t have in his possession a “right to copy” the device that he purchased. So if he copies it, he is “trespassing.” And if he sells it to a third party, why, he can’t sell “more than he owns,” so the third party buyer also doesn’t have a “right to copy”. The argument makes zero sense. If you sell a new mousetrap that has innovative new features, it’s going to be out in the world and visible to and used by people, and eventually they will learn about its design. They won’t all be under contract with the seller. The seller will probably tout those benefits in advertisements and promotional material. The information will soon be public and anyone in possession of the information would be free to use it, regardless of whether the seller muttered some incantation “I hereby reserve my copy-rights” when he decided to make his secret information public (by selling the mousetrap).

The problem here is that there cannot be property rights in information. Information is just knowledge that guides human action; human action employs or utilizes scarce resources. There are property rights in scarce resources because there can be conflict over them–only one actor can use a given scarce resource. But everyone can use the same recipes, ideas, knowledge, without conflict, to guide their own action in how they use resources at their disposal. Information is always the impatterning of an underlying substrate, which is itself an owned thing. It is a feature or characteristic or property of a material thing. The owner of a red balloon doesn’t own redness or its size or weight. He owns the balloon, and the balloon has certain properties. The owner of a book owns the paper and the ink, but not the “way the ink is impatterned.” The owner of a mousetrap owns the wood and steel and paint, but not the “way the matter is arranged.” You own your body but not its weight or age. You own your car, but not its horsepower. To own information would be to own a universal, a characteristic that all or many objects can have, which would give you ownership of all others’ objects that are impatterned in that way. As Roderick Long explains, “It may be objected that the person who originated the information deserves ownership rights over it. But information is not a concrete thing an individual can control; it is a universal, existing in other people’s minds and other people’s property, and over these the originator has no legitimate sovereignty. You cannot own information without owning other people.”

Notice how similar this is to Rothbard’s argument against defamation law:

In short, should “libel” and “slander” be illegal in the free society?

And yet, once again, how can they be? Smith has a property right to the ideas or opinions in his own head; he also has a property right to print anything he wants and disseminate it. He has a property right to say that Jones is a “thief” even if he knows it to be false, and to print and sell that statement. The counter-view, and the current basis for holding libel and slander (especially of false statements) to be illegal is that every man has a “property right” in his own reputation, that Smith’s falsehoods damage that reputation, and that therefore Smith’s libels are invasions of Jones’s property right in his reputation and should be illegal. Yet, again, on closer analysis this is a fallacious view. For everyone, as we have stated, owns his own body; he has a property right in his own head and person. But since every man owns his own mind, he cannot therefore own the minds of anyone else. And yet Jones’s “reputation” is neither a physical entity nor is it something contained within or on his own person. Jones’s “reputation” is purely a function of the subjective attitudes and beliefs about him contained in the minds of other people. But since these are beliefs in the minds of others, Jones can in no way legitimately own or control them. Jones can have no property right in the beliefs and minds of other people.

The Rothbard who opposed patents in MES and P&M and who opposed reputation rights in Ethics of Liberty, the Rothbard who wrote so brilliantly on the nature of property and contract rights in this reformulation of contract law, should have realized that his arguments against defamation applied also to trademark law, another form of IP, and that his arguments against patent should have applied to copyright too, and that his contractual arguments for “common law copyright” run afoul of his own brilliant contract law theory (Property Rights and the Theory of Contracts). He simply goofed in not opposing all IP, including patent, copyright, and trademark, root and branch.

Back to Caplan, who makes the same mistake Rothbard and others have done, in assuming that copyright is nothing more than a set of contracts between sellers (e.g. of books) and buyers—or, as Caplan hints at, it doesn’t have to be a “real” contract, but something more akin to the social contract–“copyright law simply codifies the contract that sellers of embodied ideas would wish to bind their buyers to, and so saves on private transaction costs.” Note the insidious “would” here. Copyright law just imposes a law on all of us that emulates the types of contracts we “would” enter into. Thus the state “saves on private transaction costs.” Thank you, State!

There are many, many problems with Caplan’s argument here.

First, as noted above, it’s difficult to extend this argument to other forms of IP, like patent. As even Rothbard seemed to note, even though he himself was confused by the copyright issue. So why does Caplan imply that he’s in favor of IP, instead of just copyright?

Second. You can’t just impose in rem rights on society with this ridiculous “social contract” “hypothetical contract” “what the parties would have agreed to” nonsense. What Caplan doesn’t seem to get is that the IP rights presupposed by patent and copyright law are in rem rights (property rights good against the world) and you can’t generate them by in personam (contractual) agreements. (I explain this in depth in the section Contract vs. Reserved Rights in Against Intellectual Property.) The reason is that if A and B agree to something, this doesn’t bind C. C is not in “privity of contracts with A or B. This is especially true of information. If A sells a book to B “on the condition that” B not … copy it… then sure, that’s a valid contract. But if C somehow reads the book or if B uploads it and thousands of people read it, then they don’t have a contract with A. Trying to base copyright (in rem) on contract (in personam) is fundamentally confused.

Moreoever, if we are trying to set up some regulatory scheme (copyright) that “mimics” what parties “would agree to” in real life—let’s talk about these contracts that A and B “would agree to.” If B wants to buy a book, what contract would he be willing to agree to? B is just paying $5 or $20 for a novel or nonfiction book. Why would he sign a fucking agreement to be financially liable if he copies it? Or uses it? Or if it influences his thinking and one of his works could be said to be a “derivative work”? Why would anyone sign this? I’m already paying this author $5 for his book when I could just pirate it for free on The Pirate Bay, and yet he wants me to sign an agreement to pay him yet more money if he can somehow prove I “copied” the book? So think about it: either the damages clause is small, or it’s large. If it’s small, say, $20, then it will not deter piracy. I’ll buy the book for $5 and pay my $20 “fine” if someone catches me copying it. Either way the text soon makes its way to the Internet and everyone else can copy it with no penalties because they don’t have privity of contract with the author.

Or: the fine is huge, like $1million, to deter pirates. Okay. What moron is going to sign this? If I’m willing to pay this author $5 for his “authorized” copy, I’m sure as shit not going to sign a contract obligating me to pay $1M if I use that copy in the wrong way. Fuck that. I’ll just pirate it instead.

So these contracts would never exist. The only reason they exist now is or half-exist now is because of copyright. John Deere has software that runs their tractors and they can sue customers or repair shops based on copyright infringement. Apple can stop third party repair shops from fixing your iphone with non-authorized parts. This is all just leveraging IP. In a free market none of this would happen. You buy a car, or computer, you can do whatever you want with it, since it’s yours. The seller could not control how you use it after. The whole idea is ludicrous.

Yet here we have a libertarian thinking that because a buy and seller of a “book” “would agree” to a crazy contract, that it’s fine to set up a statutory legal system to permanently entrench and emulate this. After all, as Caplan assures us, it’s not really a big deal, it’s not “onerous”:

That’s about how onerous the typical copyright is. A contract not to copy the Hero System Fifth Edition core rulebook is at worst a petty inconvenience, not a daily albatross around my neck.

Ah, it’s just a petty inconvenience. I see. Tell that to Kim Dotcom. Or Jammie Thomas. Or poor Aaron Swartz. Or this poor grad student. Or UK grad student Richard O’Dwyer? Or the guy jailed for uploading the Wolverine movie. Or the millions of videos taken down by Youtube based on DMCA complaints, or the thousands of websites taken down by ICE. Or the billions in copyright liability most of us are potentially on the hook for every year? Yeah, it’s just a petty inconvenience.

I’ve added Brian to the “bad guy” column of my compendium of Classical Liberals and Anarchists on Intellectual Property. He is free to correct the record, if I have him incorrectly categorized.