Originally posted here.

In the Meantime…

Re Mises on IP, see:

• Ludwig von Mises, Human Action 3rd rev. ed. Chicago: Henry Regnery (1966), chap. 23, section 6, pp. 661–62; see also pp. 128, 364
• Bettina Bien Greaves, “Mises on Copyrights: New Technology Requires Refinement of Private Property Rights,” The Freeman (June 01, 2004) (a confused and flawed article).

See also my Mises Blog post Mises on Intellectual Property (02/24/2009) (archived comments below):

From the Mises Blog:

In this comment on a post here (by “Andras”; see below), I was accused of hiding or avoiding mention of one of Mises’s comments about copyrights and patents. I suppose the commentor was unaware of my extensive quotes of Mises in this comment on another thread [see below], which quoted a large deal of Mises’s remarks on IP, including the one in question. So much for suppression. Since this extensive comment is buried on a thread, I reprint it below as a standalone post.As I noted in Against Intellectual Property (n. 38), “Mises expressed no opinion on the issue, merely drawing the economic implications from the presence or absence of such laws.”

Here are Mises’s words:

The External Economies of Intellectual Creation

The extreme case of external economies is shown in the “production” of the intellectual groundwork of every kind of processing and constructing. The characteristic mark of formulas, i.e., the mental devices directing the technological procedures, is the inexhaustibility of the services they render. These services are consequently not scarce, and there is no need to economize their employment. Those considerations that resulted in the establishment of the institution of private ownership of economic goods did not refer to them. They remained outside the sphere of private property not because they are immaterial, intangible, and impalpable, but because their serviceableness cannot be exhausted.

People began to realize only later that this state of affairs has its drawbacks too. It places the producers of such formulas–especially the inventors of technological procedures and authors and composers–in a peculiar position. They are burdened with the cost of production, while the services of the product they have created can be gratuitously enjoyed by everybody. What they produce is for them entirely or almost entirely external economies.

If there are neither copyrights nor patents, the inventors and authors are in the position of an entrepreneur. They have a temporary advantage as against other people. As they start sooner in utilizing their invention or their manuscript themselves or in making it available for use to other people (manufacturers or publishers), they have the chance to earn profits in the time interval until everybody can likewise utilize it. As soon as the invention or the content of the book are publicly known, they become “free goods” and the inventor or author has only his glory.

The problem involved has nothing to do with the activities of the creative genius. These pioneers and originators of things unheard of do not produce and work in the sense in which these terms are employed in dealing with the affairs of other people. They do not let themselves be influenced by the response their work meets on the part of their contemporaries. They do not wait for encouragement.[13]

It is different with the broad class of professional intellectuals whose services society cannot do without. We may disregard the problem of second-rate authors of poems, fiction, and plays and second-rate composers and need not inquire whether it would be a serious disadvantage for mankind to lack the products of their efforts. But it is obvious that handing down knowledge to the rising generation and [p. 662] familiarizing the acting individuals with the amount of knowledge they need for the realization of their plans require textbooks, manuals, handbooks, and other nonfiction works. It is unlikely that people would undertake the laborious task of writing such publications if everyone were free to reproduce them. This is still more manifest in the field of technological invention and discovery. The extensive experimentation necessary for such achievements is often very expensive. It is very probable that technological progress would be seriously retarded if, for the inventor and for those who defray the expenses incurred by his experimentation, the results obtained were nothing but external economies.

Patents and copyrights are results of the legal evolution of the last centuries. Their place in the traditional body of property rights is still controversial. People look askance at them and deem them irregular. They are considered privileges, a vestige of the rudimentary period of their evolution when legal protection was accorded to authors and investors only by virtue of an exceptional privilege granted by the authorities. They are suspect, as they are lucrative only if they make it possible to sell at monopoly prices. [14]. Moreover, the fairness of patent laws is contested on the ground that they reward only those who put the finishing touch leading to practical utilization of achievements of many predecessors. these precursors go empty-handed although their main contribution to the final result was often much more weighty than that of the patentee.

It is beyond the scope of catallactics to enter into an examination of the arguments brought forward for and against the institution of copyrights and patents. It has merely to stress the point that this is a problem of delimitation of property rights and that with the abolition of patents and copyrights authors and inventors would for the most part be producers of external economies.

and here:

The Creative Genius

Far above the millions that come and pass away tower the pioneers, the men whose deeds and ideas cut out new paths for mankind. For the pioneering genius [12] to create is the essence of life. To live means for him to create.

The activities of these prodigious men cannot be fully subsumed under the praxeological concept of labor. They are not labor because they are for the genius not means, but ends in themselves. He lives in creating and inventing. For him there is not leisure, only intermissions of temporary sterility and frustration. His incentive is not the desire to bring about a result, but the act of producing it. The accomplishment gratifies him neither mediately nor immediately. It does not gratify him mediately because his fellow men at best are unconcerned about it, more often even greet it with taunts, sneers, and persecution. Many a genius could have used his gifts to render his life agreeable and joyful; he did not even consider such a possibility and chose the thorny path without hesitation. The genius wants to accomplish what he considers his mission, even if he knows that he moves toward his own disaster.

Neither does the genius derive immediate gratification from his creative activities. Creating is for him agony and torment, a ceaseless excruciating struggle against internal and external obstacles; it consumes and crushes him. The Austrian poet Grillparzer has depicted this in a touching poem “Farewell to Gastein.” [13] We may assume that in writing it he thought not only of his own sorrows and tribulations but also of the greater sufferings of a much greater man, of Beethoven, whose fate resembled his own and whom he understood, through devoted affection and sympathetic appreciation, better than any other of his contemporaries. Nietzsche compared himself to the flame that insatiably consumes and destroys itself.[14] Such agonies are phenomena which have nothing in common with the connotations generally attached to the notions of work and labor, production and success, breadwinning and enjoyment of life.

The achievements of the creative innovator, his thoughts and theories, his poems, paintings, and compositions, cannot be classified praxeologically as products of labor. They are not the outcome of [p. 140] the employment of labor which could have been devoted to the production of other amenities for the “production” of a masterpiece of philosophy, art, or literature. Thinkers, poets, and artists are sometimes unfit to accomplish any other work. At any rate, the time and toil which they devote to creative activities are not withheld from employment for other purposes. Conditions may sometimes doom to sterility a man who would have had the power to bring forth things unheard of; they may leave him no alternative other than to die from starvation or to use all his forces in the struggle for mere physical survival. But if the genius succeeds in achieving his goals, nobody but himself pays the “costs” incurred. Goethe was perhaps in some respects hampered by his functions at the court of Weimar. But certainly he would not have accomplished more in his official duties as minister of state, theater manager, and administrator of mines if he had not written his plays, poems, and novels.

and here:

The special conditions and circumstances required for the emergence of monopoly prices and their catallactic features are:
…
11. The monopolized good by whose partial withholding from the market the monopoly prices are made to prevailcan be either a good of the lowest order or a good of a higher order, a factor of production. It may consist in the control of the technological knowledge required for production, the “recipe.” Such recipes are as a rule free goods as their ability to produce definite effects is unlimited. They can become economic goods only if they are monopolized and their use is restricted. Any price paid for the services rendered by a recipe is always a monopoly price. It is immaterial whether the restriction of a recipe’s use is made possible by institutional conditions–such as patents and copyright laws–or by the fact that a formula is kept secret and other people fail to guess it.

The complementary factor of production the monopolization of which can result in the establishment of monopoly prices may also consist in a man’s opportunity to make his cooperation in the production of a good known to consumers who attribute to this cooperation a special significance. This opportunity may be given either by the nature of the commodities or services in question or by institutional provisions such as protection of trademarks. The reasons why the consumers value the contribution of a man or a firm so highly are manifold. They may be: special confidence placed on the individual or firm concerned on account of previous experience[15]; merely baseless prejudice or error; snobbishness; magic or metaphysical prepossessions whose groundlessness is ridiculed by more reasonable people. A drug marked by a trademark may not differ in its chemical structure and its physiological efficacy from other compounds not marked with the same label. However, if the buyers attach a special significance to this label and are ready to pay higher prices for the [p. 365] product marked with it, the seller can, provided the configuration of demand is propitious, reap monopoly prices.

The monopoly which enables the monopolist to restrict the amount offered without counteraction on the part of other people can consist in the greater productivity of a factor which he has at his disposal as against the lower productivity of the corresponding factor at the disposal of his potential competitors. If the margin between the higher productivity of his supply of the monopolized factor and that of his potential competitors is broad enough for the emergence of a monopoly price, a situation results which we may call margin monopoly[16].

…
In the long run such a national cartel cannot preserve its monopolistic position if entrance into its branch of production is free to newcomers. The monopolized factor the services of which the cartel restricts (as far as the domestic market is concerned) for the sake of monopoly prices is a geographical condition which can easily be duplicated by every new investor who establishes a new plant within the borders of Atlantis. Under modern industrial conditions, the characteristic feature of which is steady technological progress, the latest plant will as a rule be more efficient than the older plants and produce at lower average costs. The incentive to prospective newcomers is therefore twofold. It consists not only in the monopoly gain of the cartel members, but also in the possibility of outstripping them by lower costs of production.

Here again institutions come to the aid of the old firms that form the cartel. The patents give them a legal monopoly which nobody may infringe. Of course, only some of their production processes may be protected by patents. But a competitor who is prevented from resorting to these processes and to the production of the articles concerned may be handicapped in such a serious way that he cannot consider entrance into the field of the cartelized industry.

The owner of a patent enjoys a legal monopoly which, other conditions being propitious, can be used for the attainment of monopoly prices. Beyond the field covered by the patent itself a patent may render auxiliary services in the establishment and preservation of margin monopoly where the primary institutional conditions for the emergence of such a monopoly prevail.

***

and here:

Another popular fallacy refers to the alleged suppression of useful patents. A patent is a legal monopoly granted for a limited number of years to the inventor of a new contrivance. At this point we are not concerned with the question whether or not it is a good policy to grant such exclusive privileges to inventors.[14] We have to deal only with the assertion that “big business” misuses the patent system to withhold from the public benefits it could derive from technological improvement.

In granting a patent to an inventor the authorities do not investigate the invention’s economic significance. They are concerned merely with the priority of the idea and limit their examination to technological problems. They deal with the same impartial scrupulousness with an invention which revolutionizes a whole industry and with some trifling gadget, the uselessness of which is obvious. Thus patent protection is provided to a vast number of quite worthless inventions. Their authors are ready to overrate the importance of their contribution to the progress of technological knowledge and build exaggerated hopes upon the material gain it could bring them. Disappointed, they grumble about the absurdity of an economic system that deprives the people of the benefit of technological progress.

and here:

The convincing power of the productivity argument is in fact so irresistible that the advocates of socialism were forced to abandon their old tactics and to resort to new methods. They are eager to divert attention from the productivity issue by throwing into relief the monopoly problem. All contemporary socialist manifestoes expatiate on monopoly power. Statesmen and professors try to outdo one another in depicting the evils of monopoly. Our age is called the age of monopoly capitalism. The foremost argument advanced today in favor of socialism is the reference to monopoly.

Now, it is true that the emergence of monopoly prices (not of monopoly as such without monopoly prices) creates a discrepancy between the interests of the monopolist and those of the consumers. The monopolist does not employ the monopolized good according to the wishes of the consumers. As far as there are monopoly prices, the interests of the monopolists take precedence over those of the public and the democracy of the market is restricted. with regard to monopoly prices there is not harmony, but conflict of interests.

It is possible to contest these statements with regard to the monopoly prices received in the sale of articles under patents and copyrights. One may argue that in the absence of patent and copyright legislation these books, compositions, and technological innovations would never have come into existence. The public pays monopoly prices for things it would not have enjoyed at all under competitive prices. However, we may fairly disregard this issue. It has little to do with the great monopoly controversy of our day. When people deal with the evils of monopoly, they imply that there prevails within the unhampered [p. 681] market economy a general and inevitable tendency toward the substitution of monopoly prices for competitive prices. This is, they say, a characteristic mark of “mature” or “late” capitalism. Whatever conditions may have been in the earlier stages of capitalist evolution and whatever one may think about the validity of the classical economists’ statements concerning the harmony of the rightly understood interests, today there is no longer any question of such a harmony.

Update: See Per Bylund’s post Mises on IP.

Update: “In the eyes of [many] people all the undesired and undesirable effects of government interference with business are caused by capitalism. The very fact that a governmental measure has brought about a state of affairs which they dislike is for them a justification of further measures. They fail, for instance, to realize that the role monopolistic schemes play in our time is the effect of government interference such as tariffs and patents. They advocate government action for the prevention of monopoly. One could hardly imagine a more unrealistic idea. For the governments whom they ask to fight monopoly are the same governments who are devoted to the principle of monopoly” – Mises, Socialism, 1922.

Update: See also Mises, “Monopoly Prices,” where Mises admits patents and copyrights are state-granted monopolies, but that he is in favor of copyright anyway, and thinks patents have done no harm and are probably a good thing.

See also Ludwig von Mises, Human Action 3rd rev. ed. Chicago: Henry Regnery (1966), chap. 23, section 6, pp. 661–62; see also pp. 128, 364

Comment from (here and here):

Andras

@Tiago,
You are absolutely right. and even Mises (Human Action, Scholar Edition, p657.) agreed. Here is what he thought about this issue:
“It is beyond the scope of catallactics to enter into an examination of the arguments brought forward for and against the institution of copyrights and patents. It has merely to stress the point that this is a problem of delimitation of property rights and that with the abolition of patents and copyrights authors and inventors would for the most part be producers of external economies.”
(This part, as far as I know, conveniently left out from Kinsella’s book. Is it only me to see a trend here) This was a dichotomy Mises tellingly rather avoided. However, he was willing to accept this compromise to internalize IP.
By the way, being externalized also means failure to calculate to second Silas.

Published: February 24, 2009 2:55 PM

• Comment from Seen and Unseen Cost of Patents:  this comment :
• Stephan Kinsella January 31, 2009 at 12:20 am

  As I noted in Against Intellectual Property (n. 38), “Mises expressed no opinion on the issue, merely drawing the economic implications from the presence or absence of such laws.”

  Here are Mises’s words:

  The External Economies of Intellectual Creation

  The extreme case of external economies is shown in the “production” of the intellectual groundwork of every kind of processing and constructing. The characteristic mark of formulas, i.e., the mental devices directing the technological procedures, is the inexhaustibility of the services they render. These services are consequently not scarce, and there is no need to economize their employment. Those considerations that resulted in the establishment of the institution of private ownership of economic goods did not refer to them. They remained outside the sphere of private property not because they are immaterial, intangible, and impalpable, but because their serviceableness cannot be exhausted.

  People began to realize only later that this state of affairs has its drawbacks too. It places the producers of such formulas–especially the inventors of technological procedures and authors and composers–in a peculiar position. They are burdened with the cost of production, while the services of the product they have created can be gratuitously enjoyed by everybody. What they produce is for them entirely or almost entirely external economies.

  If there are neither copyrights nor patents, the inventors and authors are in the position of an entrepreneur. They have a temporary advantage as against other people. As they start sooner in utilizing their invention or their manuscript themselves or in making it available for use to other people (manufacturers or publishers), they have the chance to earn profits in the time interval until everybody can likewise utilize it. As soon as the invention or the content of the book are publicly known, they become “free goods” and the inventor or author has only his glory.

  The problem involved has nothing to do with the activities of the creative genius. These pioneers and originators of things unheard of do not produce and work in the sense in which these terms are employed in dealing with the affairs of other people. They do not let themselves be influenced by the response their work meets on the part of their contemporaries. They do not wait for encouragement.[13]

  It is different with the broad class of professional intellectuals whose services society cannot do without. We may disregard the problem of second-rate authors of poems, fiction, and plays and second-rate composers and need not inquire whether it would be a serious disadvantage for mankind to lack the products of their efforts. But it is obvious that handing down knowledge to the rising generation and [p. 662] familiarizing the acting individuals with the amount of knowledge they need for the realization of their plans require textbooks, manuals, handbooks, and other nonfiction works. It is unlikely that people would undertake the laborious task of writing such publications if everyone were free to reproduce them. This is still more manifest in the field of technological invention and discovery. The extensive experimentation necessary for such achievements is often very expensive. It is very probable that technological progress would be seriously retarded if, for the inventor and for those who defray the expenses incurred by his experimentation, the results obtained were nothing but external economies.

  Patents and copyrights are results of the legal evolution of the last centuries. Their place in the traditional body of property rights is still controversial. People look askance at them and deem them irregular. They are considered privileges, a vestige of the rudimentary period of their evolution when legal protection was accorded to authors and investors only by virtue of an exceptional privilege granted by the authorities. They are suspect, as they are lucrative only if they make it possible to sell at monopoly prices. [14]. Moreover, the fairness of patent laws is contested on the ground that they reward only those who put the finishing touch leading to practical utilization of achievements of many predecessors. these precursors go empty-handed although their main contribution to the final result was often much more weighty than that of the patentee.

  It is beyond the scope of catallactics to enter into an examination of the arguments brought forward for and against the institution of copyrights and patents. It has merely to stress the point that this is a problem of delimitation of property rights and that with the abolition of patents and copyrights authors and inventors would for the most part be producers of external economies.

  and here:

  The Creative Genius

  Far above the millions that come and pass away tower the pioneers, the men whose deeds and ideas cut out new paths for mankind. For the pioneering genius [12] to create is the essence of life. To live means for him to create.

  The activities of these prodigious men cannot be fully subsumed under the praxeological concept of labor. They are not labor because they are for the genius not means, but ends in themselves. He lives in creating and inventing. For him there is not leisure, only intermissions of temporary sterility and frustration. His incentive is not the desire to bring about a result, but the act of producing it. The accomplishment gratifies him neither mediately nor immediately. It does not gratify him mediately because his fellow men at best are unconcerned about it, more often even greet it with taunts, sneers, and persecution. Many a genius could have used his gifts to render his life agreeable and joyful; he did not even consider such a possibility and chose the thorny path without hesitation. The genius wants to accomplish what he considers his mission, even if he knows that he moves toward his own disaster.

  Neither does the genius derive immediate gratification from his creative activities. Creating is for him agony and torment, a ceaseless excruciating struggle against internal and external obstacles; it consumes and crushes him. The Austrian poet Grillparzer has depicted this in a touching poem “Farewell to Gastein.” [13] We may assume that in writing it he thought not only of his own sorrows and tribulations but also of the greater sufferings of a much greater man, of Beethoven, whose fate resembled his own and whom he understood, through devoted affection and sympathetic appreciation, better than any other of his contemporaries. Nietzsche compared himself to the flame that insatiably consumes and destroys itself.[14] Such agonies are phenomena which have nothing in common with the connotations generally attached to the notions of work and labor, production and success, breadwinning and enjoyment of life.

  The achievements of the creative innovator, his thoughts and theories, his poems, paintings, and compositions, cannot be classified praxeologically as products of labor. They are not the outcome of [p. 140] the employment of labor which could have been devoted to the production of other amenities for the “production” of a masterpiece of philosophy, art, or literature. Thinkers, poets, and artists are sometimes unfit to accomplish any other work. At any rate, the time and toil which they devote to creative activities are not withheld from employment for other purposes. Conditions may sometimes doom to sterility a man who would have had the power to bring forth things unheard of; they may leave him no alternative other than to die from starvation or to use all his forces in the struggle for mere physical survival. But if the genius succeeds in achieving his goals, nobody but himself pays the “costs” incurred. Goethe was perhaps in some respects hampered by his functions at the court of Weimar. But certainly he would not have accomplished more in his official duties as minister of state, theater manager, and administrator of mines if he had not written his plays, poems, and novels.

  and here:

  The special conditions and circumstances required for the emergence of monopoly prices and their catallactic features are:
  …
  11. The monopolized good by whose partial withholding from the market the monopoly prices are made to prevail can be either a good of the lowest order or a good of a higher order, a factor of production. It may consist in the control of the technological knowledge required for production, the “recipe.” Such recipes are as a rule free goods as their ability to produce definite effects is unlimited. They can become economic goods only if they are monopolized and their use is restricted. Any price paid for the services rendered by a recipe is always a monopoly price. It is immaterial whether the restriction of a recipe’s use is made possible by institutional conditions–such as patents and copyright laws–or by the fact that a formula is kept secret and other people fail to guess it.

  The complementary factor of production the monopolization of which can result in the establishment of monopoly prices may also consist in a man’s opportunity to make his cooperation in the production of a good known to consumers who attribute to this cooperation a special significance. This opportunity may be given either by the nature of the commodities or services in question or by institutional provisions such as protection of trademarks. The reasons why the consumers value the contribution of a man or a firm so highly are manifold. They may be: special confidence placed on the individual or firm concerned on account of previous experience[15]; merely baseless prejudice or error; snobbishness; magic or metaphysical prepossessions whose groundlessness is ridiculed by more reasonable people. A drug marked by a trademark may not differ in its chemical structure and its physiological efficacy from other compounds not marked with the same label. However, if the buyers attach a special significance to this label and are ready to pay higher prices for the [p. 365] product marked with it, the seller can, provided the configuration of demand is propitious, reap monopoly prices.

  The monopoly which enables the monopolist to restrict the amount offered without counteraction on the part of other people can consist in the greater productivity of a factor which he has at his disposal as against the lower productivity of the corresponding factor at the disposal of his potential competitors. If the margin between the higher productivity of his supply of the monopolized factor and that of his potential competitors is broad enough for the emergence of a monopoly price, a situation results which we may call margin monopoly[16].

  …
  In the long run such a national cartel cannot preserve its monopolistic position if entrance into its branch of production is free to newcomers. The monopolized factor the services of which the cartel restricts (as far as the domestic market is concerned) for the sake of monopoly prices is a geographical condition which can easily be duplicated by every new investor who establishes a new plant within the borders of Atlantis. Under modern industrial conditions, the characteristic feature of which is steady technological progress, the latest plant will as a rule be more efficient than the older plants and produce at lower average costs. The incentive to prospective newcomers is therefore twofold. It consists not only in the monopoly gain of the cartel members, but also in the possibility of outstripping them by lower costs of production.

  Here again institutions come to the aid of the old firms that form the cartel. The patents give them a legal monopoly which nobody may infringe. Of course, only some of their production processes may be protected by patents. But a competitor who is prevented from resorting to these processes and to the production of the articles concerned may be handicapped in such a serious way that he cannot consider entrance into the field of the cartelized industry.

  The owner of a patent enjoys a legal monopoly which, other conditions being propitious, can be used for the attainment of monopoly prices. Beyond the field covered by the patent itself a patent may render auxiliary services in the establishment and preservation of margin monopoly where the primary institutional conditions for the emergence of such a monopoly prevail.

  and here:

  Another popular fallacy refers to the alleged suppression of useful patents. A patent is a legal monopoly granted for a limited number of years to the inventor of a new contrivance. At this point we are not concerned with the question whether or not it is a good policy to grant such exclusive privileges to inventors.[14] We have to deal only with the assertion that “big business” misuses the patent system to withhold from the public benefits it could derive from technological improvement.

  In granting a patent to an inventor the authorities do not investigate the invention’s economic significance. They are concerned merely with the priority of the idea and limit their examination to technological problems. They deal with the same impartial scrupulousness with an invention which revolutionizes a whole industry and with some trifling gadget, the uselessness of which is obvious. Thus patent protection is provided to a vast number of quite worthless inventions. Their authors are ready to overrate the importance of their contribution to the progress of technological knowledge and build exaggerated hopes upon the material gain it could bring them. Disappointed, they grumble about the absurdity of an economic system that deprives the people of the benefit of technological progress.

  and here:

  The convincing power of the productivity argument is in fact so irresistible that the advocates of socialism were forced to abandon their old tactics and to resort to new methods. They are eager to divert attention from the productivity issue by throwing into relief the monopoly problem. All contemporary socialist manifestoes expatiate on monopoly power. Statesmen and professors try to outdo one another in depicting the evils of monopoly. Our age is called the age of monopoly capitalism. The foremost argument advanced today in favor of socialism is the reference to monopoly.

  Now, it is true that the emergence of monopoly prices (not of monopoly as such without monopoly prices) creates a discrepancy between the interests of the monopolist and those of the consumers. The monopolist does not employ the monopolized good according to the wishes of the consumers. As far as there are monopoly prices, the interests of the monopolists take precedence over those of the public and the democracy of the market is restricted. with regard to monopoly prices there is not harmony, but conflict of interests.

  It is possible to contest these statements with regard to the monopoly prices received in the sale of articles under patents and copyrights. One may argue that in the absence of patent and copyright legislation these books, compositions, and technological innovations would never have come into existence. The public pays monopoly prices for things it would not have enjoyed at all under competitive prices. However, we may fairly disregard this issue. It has little to do with the great monopoly controversy of our day. When people deal with the evils of monopoly, they imply that there prevails within the unhampered [p. 681] market economy a general and inevitable tendency toward the substitution of monopoly prices for competitive prices. This is, they say, a characteristic mark of “mature” or “late” capitalism. Whatever conditions may have been in the earlier stages of capitalist evolution and whatever one may think about the validity of the classical economists’ statements concerning the harmony of the rightly understood interests, today there is no longer any question of such a harmony.

Archived comments for the original post:

40 comments }

Jack Skylark February 24, 2009 at 4:23 pm

“Yet there is an exception to this general rule that monopoly prices benefit the seller and harm the buyer and infringe the supremacy of the consumers’ interests. If on a competitive market one of the complementary factors, namely F, needed for the production of the consumer’s good G, does not attain any price at all, although the production of F requires various expenditures and consumers are ready to pay for the consumers’ good G a price which makes its production profitable on a competitive market, the monopoly price for F becomes a necessary requirement for the production of g. It is this idea that advance in favor of patent and copyright legislation. If inventors and authors were not in a position to make money by inventing and writing, they would be prevented from devoting their time to these activities and from defraying the costs involved. The public would not derive any advantage from the absence of monopoly prices for F. It would on the contrary, miss the satisfaction it could derive from the acquisition of G.” – Ludwig von Mises, Human Action Pg. 383

I noticed you left this one out… Anyways, I may not be able to reply more for the next couple of days, but I take issue with many of your conclusions from previous posts.

As a start, we have to throw out the modern day patent (for reasons already pointed towards by you) as any sort of natural rights based IP, so this leaves us with copyright. I’ll go ahead and say right now that I am a proponent of Murry Rothbards concept of the “inventors copyright” which is wholly different than that of the modern day patent.

Secondly, and as a point I think needs to be brought up, Mises never said that ideas were non-scarce. Instead he said that the services rendered are not scarce, but you must have complete ownership of the scarce idea in order to obtain the infinite supply of services.

I have no more time to spare in responding, but I would like to continue this at a later time.

Andras February 24, 2009 at 5:07 pm

Kinsella:”As I noted in Against Intellectual Property (n. 38), Mises expressed no opinion on the issue, merely drawing the economic implications from the presence or absence of such laws.”

It can be one, a convenient way to deal with this quote:
“It is beyond the scope of catallactics to enter into an examination of the arguments brought forward for and against the institution of copyrights and patents. It has merely to stress the point that this is a problem of delimitation of property rights and that with the abolition of patents and copyrights authors and inventors would for the most part be producers of external economies.”

However, I believe it expresses much more than just to be swept it aside as done above.
Mises recognizes the dichotomy and leaves it to social engineers to offer a compromise if society wanted to internalize the IP world. He does this since he recognizes that it is impossible, on a theoretical basis, to approach IP.
In this sense all solutions are utilitarian and all theoritizing of these solutions are mute.
Accordingly, Kinsella is as much of a social engineer in IP questions as the state agents.
The main question then is not whether IP exist or not but whether society wants to internalize IP or not. If it does recognition of IP laws are not only acceptable but necessary.

Ansury February 24, 2009 at 5:20 pm

Maybe I am just too dim to follow without reading things three times slowly–but is it just me or does Mises sometimes write run-on sentences that are hard to follow? (referring to the F and G sentences)

Anyway would it be correct to say that this is the basic idea (dummies version) of what he’s saying in the extra quote added in comments above?

“If inventors and authors were not in a position to make money by inventing and writing, they would be prevented from devoting their time to these activities and from defraying the costs involved.”

In other words here is he saying that copyrights motivate people to create new things that otherwise wouldn’t (or couldn’t) be created? (Or more specifically, they allow creators to make a living off of their work, which I guess requires full-time devotion to finish in a reasonable time.)

This sounds to me like the standard argument in favor of copyright protection. The motivational argument–”people won’t create new things otherwise”. But then I have to wonder why so much innovation took place centuries ago when there were no such laws.

(I am quite on-the-fence and open minded on the issue, in case that isn’t already obvious!)

Tarcísio November 29, 2010 at 10:53 pm

No internet. Reduced availability of capital and human resource.
Less free riders and copying technology.

Jack Skylark February 24, 2009 at 5:42 pm

Ansury,

“But then I have to wonder why so much innovation took place centuries ago when there were no such laws.”

One thing to remember is that the effects of enforced IP were around long before copyright/patent laws, in such a way that inventors were either contracted by the state – or the state favored some inventors over others (you can also think of this in the area of the arts, i.e. classical baroque music). Then we also have the notion of the “natural” IP (which could explain why the early windmill would not be easily copied), but this is less important to this conversation.

Now as to why someone would bring to the market the product (idea) that, once there, has a price of $0 is explained through either:
1) altruism (i.e. the new communist man)
2) first supplier advantage (which is only a benefit for incremental inventions)
3) Personal usage (think of making a shovel, or the invention of the wheelbarrow)

Another thing is that, with no IP, ideas used to produce goods that help in production will be developed (since they can be sucessfully hidden), while ideas for goods that are to be produced for the consumer will have a diminishing effect on supply, in the absence of IP (since the idea cannot be hidden).

I sort of rambled in this post, and haven’t really finished answering your reply, but I’m out of time. So, thank you for your consideration and for your forgiveness for any clarifications I will need to make later.

Jay Lakner February 24, 2009 at 5:48 pm

@Andras
**Mises recognizes the dichotomy and leaves it to social engineers to offer a compromise if society wanted to internalize the IP world. He does this since he recognizes that it is impossible, on a theoretical basis, to approach IP.**

Well if that was Mises’ meaning, then I’m simply going to have to disagree with him there. This subject can be approached on a theoretical basis. And it all starts with the fundamental foundations of Austrian Economics: Property Rights.

Copyrights and patents directly violate property rights.
If there are restrictions on what you can do with your property, then it really isn’t your property.

I think Mises missed the distinction between intellectual property that establishes identity and intellectual property that sets limitations on what people can do with property.

Trademarks, business names and logos are all used to establish identity and are crucial to the protection of property rights as they allow consumers to identify similar goods and services from one another.

Copyrights and patents simply restrict your actions on certain goods and services you own or seek to aquire, thus violating property rights.

One group protects property rights, the other violates them.

Part of the problem is that all these things have all been bundled up into one big category, “Intellectual Property”, when they really should never have been.

The answer is simple, redefine identity-establishing IP in a different category. Don’t call it IP for starters.

And immediately disallow any constraints on an economy that in any way violate property rights. ie copyrights, patents and any other form of Intellectual Property that breaks property rights.

Jay Lakner.

Brian February 24, 2009 at 5:56 pm

@skylark

Another thing is that, with no IP, ideas used to produce goods that help in production will be developed (since they can be sucessfully hidden), while ideas for goods that are to be produced for the consumer will have a diminishing effect on supply, in the absence of IP (since the idea cannot be hidden).

Huh? You seem to be under the impression that an idea is a thing. Can you touch it, smell it, etc? Can it be detected by physical means? Can it be transferred such that one loses an idea by giving it to another? No, no, and no. It is nonsensical to speak of a supply of non-things. An idea cannot be hidden, embedded, stored away, buried, etc. This is gibberish.

Andras February 24, 2009 at 6:36 pm

@Jay Lakner
You renamed a large chunk of IP as identity. Let that be though I can not see on what distinction.
Let’s consider patents then, specifically drug patents as they are the least argued. You say they brake property rights. I disagree. The present system offers a trade between the inventor and the copiers. That is by filing and disclosing the invention the inventors receive a monopoly of use for a given period of time. So you may be not able to take advantage of the copying now but your off-spring will be (especially if you were saved by this drug). It is important to know that at the moment of filing it is not only scarce but unique, a singular and best solution of a given problem as requested by the patent office (backed by hard evidence). At this point, before disclosure it is still an economic good even by your definition. The fact that it can potentially be copied does not matter. It just shows that it is not black magic but a result of a rational process which “anybody” could understand. The trade involves this value. The alternative is the posibility that may not have the invention at all, i.e., being internalized or not. Arbitrary? Yes! That is what Mises recognized.

Jay Lakner February 24, 2009 at 7:14 pm

@Andras

Let’s have a closer look. I’ll try to keep this as simple an example as possible.

You sell me some drugs (to save my life).
I now own the drugs.
It is my property to do with what I please.
I choose not to take the life-saving drugs straight away.
I decide to take them to my lab and analyse them.
I then discover a technique to create my own.
I start mass producing them and selling them (after taking the required amount myself and saving my own life first, of course)
I then get sued for infringing on your patent.

It turns out I did not have the right to do whatever I wanted with my own property.

ie property rights have been breached.

Let me be clear, government-granted patents are a breach of property rights. However, individual contracts between people and business are not.

Had I signed a contract stating that I would not analyse and duplicate the drug as a condition of purchase, then that’s a whole different story.
Since such contracts are possible, patents,on top of being a basic breach of property rights, clearly are not even needed.

Andras February 24, 2009 at 7:38 pm

@Jay Lakner
I am happy you recognized that there is value involved here, after all your life is on stake. This is the issue in question, this is what Kinsella try to obliterate. The suggestion in your last paragraph involves copyrights as an alternative. That is also acceptable though seems less practical.
Please understand I am not for exclusive state enforced rights. They can be listed in private title offices just have any and be honored.
Yes I realize that “government-granted patents are a breach of property rights” but under our current system every right is that even if we try to pretend otherwise. Beyond that they are compromises as well, exactly as Mises showed above, and the government “volunteered” as usual to enforce them.

Jay Lakner February 24, 2009 at 7:50 pm

@Andras

The problem with Government enforced patents and copyrights is that they punish those individuals or groups who independently discover the same ideas and inventions.

One group discovers a new drug and patents it.
One year later a different group discovers that new drug but is not allowed by law to create it, distribute it and sell it.
This second group has not breached any contract yet they will be sued if they produce the drug.
This is exactly how patents can be a direct breach of property rights.

Government’s role should be to enforce private contracts, not grant artificial monopolies.

Gil February 24, 2009 at 8:04 pm

So do you want to barred from using your own property J. Lakner or not? Why would happily sign away your rights in a private transaction yet ignore the writing stated on the bottle as to what the public restrictions are? Why abide by one set of rules but not another?

Anthony November 29, 2010 at 11:24 pm

Gil,

That does not answer the issue of independent discovery of the drug.

RichF February 24, 2009 at 9:43 pm

Jay Lakner, thanks for your clear and insightful comments here. The issue does come down to, as usual, fundamental property rights. Patents and copyrights destroy them.

Andras February 24, 2009 at 9:47 pm

@Jay Lakner,
If you are familiar with drug discovery you know that this is impossible. Every researcher is obligated to follow the work of the competition. There is now virgin territory. If there was a conflict that is due to calculated risk. This is in the card from the beginning. Selection of projects involves IP from the beginning.

Andras February 24, 2009 at 9:48 pm

@Jay Lakner,
If you are familiar with drug discovery you know that this is impossible. Every researcher is obligated to follow the work of the competition. There is now virgin territory. If there was a conflict that is due to calculated risk. This is in the card from the beginning. Selection of projects involves IP from the beginning.

Jay Lakner February 25, 2009 at 4:28 am

@Andras

Please understand that I am not making suggestions that I feel will be practical under the current system. I am discussing what can and can not be allowed to exist in a free market.
There is not a single free market in the entire world. Of course free market suggestions are going to be labelled as “impossible”.

For example, your statement is similar to saying that the gold standard is impossible because banking systems require the central bank to inflate the monetary supply.

Your statement as well as the above statement make many false assumptions.

If a gold standard is adopted, then a restructuring of the entire way we do banking is required in order for it to work. Similarly, if we completely remove patents, then a restructuring of the entire way that the drug industry operates is required in order for it to work.

Huang Di February 25, 2009 at 5:44 am

The FUNDAMENTAL problemS with patents :

– First of all, they where historically SOMEWHAT beneficial to mankind’s drive for knowledge, as Historically huge investments had to be protected against the appropriation by simple spies … However, this is NO LONGER the case, as IP is now mainly pursued by oligarchic companies, in an effort to get rid of the bugging competition for their all-powerfull market share (hence putting a stone for SOME government intervention in economics, for the purpose of crushing monopolies & oligarchic behaviours … which it is DEFINITELY NOT doing at the moment)

– IP’s second major flaw : the CURRENT drive by worldwide organizations to extend ad-nauseam the length of time under which protection is awarded … 70+ years AFTER the author’s death for copyrights is RIDICULOUS (where’s the so-called ‘incentive’ to advancement of knowledge, for a DEAD MAN), and 25+ years for patents, in a world where we DESPERATELY NEED solutions for pollution/ecologic disasters before us is nothing less than SHOOTING OURSELVES IN THE BACK (inventions are made through ‘stepping on the shoulders of giants).
On that subject, one may be well inspired to look at the SECRET drafting of the ACTA treaty …

– Thirdly, IP laws produce artificial monopolies … one has to keep in mind that the owner of the IP (who is NOW often not the producer of it, illustrating the problems stemming from the current assymetrical rights between individual HUMANS and ARTIFICIAL companies) IS NOT MANDATED TO LICENCE ITS INVENTIONS TO ANYONE … on that subject, one may be inspired to look at the 1960s patents brought by oil companies, he may discover staggering things, like water-based engines, or at least working desings for Stirling ones (and there exists way MORE DELIBERATELY COVERED technologies from the past …)

– And lastly, some research (laughed at by the scientific community, instead of seriously investigating them …) claim that we think at least partly through the use of “morphic fields” (in recent times, see Rupert Sheldrake, 1980s, through it’s been present for millenias in religious litterature), a form of collective unconscious … if it’s proven true (and the coincidences through the World’s history seem to indicate it is), then the VERY BASIS FOR IP LAWS will crumble instantly !!!

All those are disturbing facts, especially when pieced together … in my opinion, they may be related to a school of thought called ‘imanentizing the eschaton’, the proponents of which seem to include GW. Bush, James G Watt and Dirk Kempthorne …

As a last remark, have you considered the FULL implications of the Libertarian school of thought (seeing a small feline purring, I call it a cat) .:. especially considering some of the lesser-known religious teachings (which can and were proven in ancient times to have sound scientific grounds) ?? .:.
For instance, did you know that an indian comentator to the Vedas dicovered the speed of Light as early as in the THOURTEENTH CENTURY AD. ?

–
My very ‘own’ thoughts, not presently affiliated with any group …
“Satyam Eva Jayata”, as they say in India …
“Volnyaya Staya”, as they say in Russia …
“Tadyate gate gate paragate parasamgate bodhi svaha”, as they say in Tibetan Buddhism …

May you find GENUINE happiness in this life, as God intended you to …

Gary Hall February 25, 2009 at 6:40 am

Interesting article regarding Psion attempting to protect their trademarked term “netbook”, which has since become a synonym for “small laptop”.

http://www.reghardware.co.uk/2009/02/25/intel_sues_psion/

J. W. Hawley February 25, 2009 at 9:43 am

I’m with Mises on this issue: I’m not sure. I would like an answer to a simple question though.

Suppose the cure for cancer is discovered. Further suppose that it involves mixing an isotope of cadmium with an isotope of beryllium in water. You drink this over a period of 6 months and your cancer is cured. Now if I understand IP proponents correctly this should be patentable.

Now let us break this down a little. What if the cure is mixing orange juice and codliver oil? If I have cancer and mix orange juice and codliver oil, choke the stuff down for six months and cure my cancer, are you saying that Johnny Galt has the right to shoot me for this? Remember that all laws and rights are ultimately enFORCED, usually with a gun.

If the answer to this question is no, then why? How is mixing codliver oil and orange juice any different than mixing chemicals (it really is mixing chemicals!). It seems there’s an element of magic here. We make the process complex and suddenly it’s property, while a recipe for the best german chocolate cake in the history of the world is not.

Can someone please clarify this for me?

Jay Lakner February 25, 2009 at 10:20 am

@J. W. Hawley

According to the fundamentals of property rights, if it’s your orange juice and it’s your codliver oil, then you are allowed to mix them and then consume, sell, distribute, destroy or do anything you want with the resultant mixture.

If there is a patent on that mixture then you will be sued, restrained, incarcerated and stolen from as punishment for violating another inventor’s patent.

As can be seen, both situations cannot coexist. Either there are patents or there are property rights, but not both because patents directly violate other individuals’ property rights.

Your example is an excellent one and simply highlights how patents directly violate one of the core assumptions of Austrian Economics.

If Mises truly was sitting on the fence on this issue (it’s very hard to tell from his writings), then it’s completely clear that he was wrong to do so.

Jay Lakner.

Jack Skylark February 25, 2009 at 11:06 am

Pro-IP does not mean you are for the modern day patent. This has been said over and over, and must be understood so that the debate can continue.

I suggest you read Rothbard’s support for an “inventors copyright”. This solves the issue of both entry into the market as well as independent thought. What Rothbard says is that looking at a work that is under copyright and then you copy it, you are commiting implicit theft (you knew and understood it was theft).

But if you come up with the “cure for cancer” on your own, there is nothing I can do to stop you from mass producing it. The whole thing is in contracts. You do not have full ownership relating to the action of an idea if you are bound by the contract of copyright.

Secondly, property rights are not a “core assumption” of austrian economics (perhaps libertarianism or anarcho-capitalism), but you are wrong here.

Thirdly, you think that you have full ownership of the things you posess. But this simply is not true. Many times you purchase something with the implicit understanding that there are “reserved rights”, or you agreed to a “EULA” or you signed a “terms of use agreement”… In fact, you do not have full ownership of almost anything on your computer… You have conditional ownership, outlined in contract – including copyright.

Once again, patent is something completely different and does interfere with property rights.

Jay Lakner February 25, 2009 at 11:41 am

@Jack Skylark
**Secondly, property rights are not a “core assumption” of austrian economics (perhaps libertarianism or anarcho-capitalism), but you are wrong here.**

Property Rights are at the heart of Austrian Economics.

If the assumption, “Every individual has the right to own and aquire property” is not part of the foundations, then the entire works of the Austrian School of economics falls apart.

When combined with the assumption that “With every action, each individual seeks to maximise their satisfaction”, it logically leads to the conclusion that “every trade between two parties is voluntary and must increase the satisfaction of both parties”.

These are part of the starting steps towards which the entire Austrian School’s theories are based upon.

I suggest you need to do a bit more reading and aquaint yourself with the starting principles of Austrian Economics.

Brian Gladish February 25, 2009 at 12:16 pm

Jay Lakner,

Von Mises said that natural rights do not exist, so I would support Jack Skylark’s position position in this case. I think the action axiom stands alone at the foundation.

I Hate Microsoft And EULA’s February 25, 2009 at 1:08 pm

“or you agreed to a “EULA” or you signed a “terms of use agreement”… ”

I never agree to any EULA, it’s nothing but shams and gobble-dy-gook and 100 pages.

It’s only a take it or leave it but many times you have no choice but to take it even if you don’t agree with what’s said.

I consider EULA’s to be FRAUD. I paid for the fucking software, it’s MINE and I will do whatever I want with it.

I will reverse engineer it if I want and I will copy and paste stuff from it if I want.

I really hate companies and legal terms that are designed to prevent others from being competitive, I hate monopolies and I hate theft like EULA’s are.

It’s really gross and shameful theft. Microsoft are more concerned about protecting themselves against “piracy” and against copying than they are concerned about making a good product that works.

Well, even if Microsoft is swimming in cash, has an army of lawyers and the “best” programmers, it is being threatened by Google, Apple and Linux.

The market prefers the quality and innovation of it’s competitors rather than the rude and arroguant attitude of Microsoft.

Gary Hall February 25, 2009 at 2:02 pm

I Hate Microsoft And EULA’s:

In some areas Microsoft do, indeed, produce substandard software. Vista is regarded as a poor operating system that is not worth the upgrade fee from XP. However, their developer tools are really good, Visual Studio is good value in my opinion. There is no blanket statement that could sufficiently describe the quality of the products that they offer.

Sadly, for you, EULAs exist and are valid contracts. If you didn’t like a EULA you could disagree and – significantly – not use the software. Instead, use a free / open source / shareware alternative. To agree and violate the EULA is simply illegal currently, regardless of your ideology.

Also, I’m not sure you can claim that a software product that you purchased is entirely yours to do with what you will. Whether this applies both in the current status quo – in which you certainly can’t make such a claim – or in an Austrian hypothesis – which this IP argument pertains to – I have absolutely no idea. I’m open to suggestions as to where to delineate rights.

Reverse engineering isn’t an inherently nefarious practice; it can be a valid learning experience and one that I have dabbled in myself. But, is using that knowledge to derive unauthorised use of software, create a keygen or provide valid serials akin to breaking a physical lock on property? Extending the metaphor, those that walk by the house and opportunistically take something from inside would be analogous to people who use a keygen to circumvent software protection. Are both the reverse engineer and the opportunist not culpable in some way?

IP seems to apply more and more to software development. There are innumerable ways to implement software and the justification for one method over another can border on religious, let alone subjective. It is a relatively young discipline. Does the lack of scarcity of a software product mean that it can should be copyable and redistributable freely by anyone? Once compiled, copying and redistribution is trivial.

As a quick example, I googled for software patents and found this: http://v3.espacenet.com/publicationDetails/biblio?CC=US&NR=7013284&KC=&FT=E This worries me because it is so generic, and potentially natural, a solution that it could probably be implemented by anyone without any knowledge of this patent at all.

My current conclusion is this: if the entrepreneur brings his creation to market, the entry costs to the first person to buy the software are so negligible that they could undercut the innovator almost instantly. However, contracts can protect the innovator and impose restrictions on the use of the software, which the buyer must agree to or the deal is off. I see no need for state monopoly enforcement through copyright / patent / any other IP. If the buyer contravenes the contract, they are culpable under an applicable contract law.

Jay Lakner February 25, 2009 at 2:07 pm

@Brian Gladish
**Von Mises said that natural rights do not exist, so I would support Jack Skylark’s position position in this case. I think the action axiom stands alone at the foundation.**

Simply saying “natural rights do not exist” does not mean that Austrian Economics is not fundamentally based on property rights.

I completely agree with Mises, the concept of natural rights is very silly. Mises was utilitarian in his approach to the formulation of Austrian Economics and natural law has no place in it. I’ll try to explain.

Natural rights is a concept derived from natural law. Natural law philosophy defines natural law as the concept of a body of moral principles that is common to all humankind and, as generally posited, is recognizable by human reason alone.

Natural law does not describe the laws of nature but instead is a human created concept of justice … the way things ought to be as perceived by human beings. The laws of nature are the limitations on what mankind can and cannot do. The two are very different but are often confused with one another.
For the rest of this response I will call “the laws of nature” “the laws of the universe” instead to avoid possible confusion.

The formulation of Austrian Economics is independent of so-called natural law. Austrian Economics combines the laws of the universe with utilitarian restrictions.

The founding assumption of Austrian Economics (the action axiom) is a law of the universe. I prefer to state a partial version of this: “With every action, every human being seeks to maximise their satisfaction” because it’s much easier to explain Austrian concepts this way.

Next, the utilitarian restriction “Every individual has the right to own and aquire property” is combined with this starting law of the universe and the formulation of Austrian Economics abounds from that.

There are, of course, other assumptions and restrictions that form the basis for Austrian Economics but there is no need to go into them here.

Yes, Mises said Natural Rights do not exist and yes I agree with him. Austrian Economics is not a formulation of natural law but instead is a formulation of the consequences of placing utilitarian restrictions on the laws of universe.

The only restrictions placed are in the forms of individual rights, ie you have the right to your life, you cannot physically interfere with other individuals, you have the right to own and aquire property, etc. These individual rights are not assumed because they represent the laws of the universe, they are restrictions placed on the system because they lead to mutual cooperation and the greater prosperity of humanity.

Artisan February 25, 2009 at 2:58 pm

One thing Mises does say and which made sense to me long before I even read this quote:

“…These services (artistic creation) are consequently not scarce… NOT BECAUSE THEY ARE IMMATERIAL, intangible, and impalpable, but because their serviceableness cannot be exhausted.”

This makes a whole lot of difference in terms of economy and logic.

Many libertarians don’t bother to reflect upon that difference it seems and I’m sure in ten years they will still write about economy and property being all a question of atomic structure…

Jack Skylark February 25, 2009 at 4:39 pm

Lakner,

You are wrong to say that property rights are essential to austrian economics. In many cases Mises states that property rights are assumed so as to show individual effects of a localized action. But this in no way says that they are required, the principals of human action will be present in any property rights environment.

I would say you are making a value statement in claiming the austrian necessity for property rights, which is entirely un-austrian. So perhaps it is you who needs to do some more reading.

Jack Skylark February 25, 2009 at 4:46 pm

Lakner,

Since you claim to not argue based on “natural law” but on utilitarinism or pragmatism, have you ever thought that the absence of IP (by which I mean Rothbard’s “inventors copyright”, not modern patent) would create a misesian economic calculation problem? As well as the problems Mises pointed out in the quote I provided in my first post?

newson February 25, 2009 at 7:57 pm

to jack skylark:
this contention of yours – “first supplier advantage (which is only a benefit for incremental inventions)” – is not a given.

in many cases, reverse engineering is a costly and time-consuming exercise. even if innovation becomes, on average, more step-like, so what? progress could equally be effected by many more smaller steps, than irregular, large steps. there’s more than one way to skin a cat.

Andras February 25, 2009 at 11:37 pm

@Newson,
You sound like the government. They also think they can do whatever they want the entrepreneur will figure out how to survive. This is another sign of a socialist. Or as Thatcher said ” the problem with socialists is that sooner or later they will run out of other people’s money”.

newson February 26, 2009 at 3:17 am

the problems with the thatchers is they talk the talk, but don’t walk the walk.
if you think maggie t. left a great libertarian legacy, you’ll probably have been a fan of gw bush.
dirigiste, centralist, welfare-increasing, war-mongering etc.
have a read of “accountable to none: the tory nationalization of britain” by simon jenkins, before you start quoting thatcher to bolster your arguments. better to stick with hayek.

by the way, don’t you have a vested interest, working in pharma?

anon February 26, 2009 at 3:29 am

I don’t think that label is quite fair for Thatcher i.m.o. – and the GW bush label is just ridiculous.

She’s probably the greatest politician with classical liberal convictions for the second half of the 20th century. Quite unlike Reagan. But I agree that her instincts were largely conservative – classical liberalism is the ideal, but in a less than ideal world you are compelled to undertake certain actions (defense, etc). This problem is particularly acute in a democracy where you’re held hostage to the whims and fancies of the populace.

I’ve read Rothbard’s opinion of her. Anyone know what Hayek thought of her legacy?

Jay Lakner February 26, 2009 at 3:40 am

@Jack Skylark
**You are wrong to say that property rights are essential to austrian economics. In many cases Mises states that property rights are assumed so as to show individual effects of a localized action. But this in no way says that they are required, the principals of human action will be present in any property rights environment.**

It is true that the action axiom can be applied to any situation, even situations devoid of any property rights. However, in those situations economic calculation is impossible.

Economic calculation is only possible in situations where property rights are present. This is the crux of the economic refutation of socialism. Without property rights, there is no price system, future predictions become virtually impossible, decisions become arbitrary and everything must break down.

That is exactly why property rights are a core principle of Austrian Economics. The alternate must result in economic collapse. Mises’ demonstration of this is one of his greatest contributions.

This conclusion resulted in property rights being established as a core principle of Austrian Economics which later economists built upon.

newson February 26, 2009 at 4:53 am

to anon:
be specific: which part isn’t true about thatcher: dirigiste, centralist, war-monger, or someone who presided over a growth in the public sector and in particular welfare payments?

she lowered some of the marginal tax rates, and crushed the unionocracy, but let’s not get too teary-eyed. the state increased in vigour during her watch. like reagan, she’s popularly and erroneously viewed as a laissez-faire statesman, as is the “free-trader” gwb.

Jay Lakner February 26, 2009 at 7:10 am

@Jack Skylark
**Since you claim to not argue based on “natural law” but on utilitarinism or pragmatism, have you ever thought that the absence of IP (by which I mean Rothbard’s “inventors copyright”, not modern patent) would create a misesian economic calculation problem? As well as the problems Mises pointed out in the quote I provided in my first post?**

Economic calculation problems arise when property rights are violated because a violation of property rights skews the price system and makes future predictions less accurate.
Since I am arguing that copyrights and patents are a direct violation of property rights, it is easy to see that I am arguing the opposite of what you’ve just described. I am saying:
The employment of IP (copyrights and patents) must create a misesian economic calculation problem.

As for your second question, I’ll repeat part of Mises’ quote:
“If on a competitive market one of the complementary factors, namely F, needed for the production of the consumer’s good G, does not attain any price at all, although the production of F requires various expenditures and consumers are ready to pay for the consumers’ good G a price which makes its production profitable on a competitive market, the monopoly price for F becomes a necessary requirement for the production of g.”

I fail to see why a government granted monopoly is required to solve this problem.

Why can’t F be leased out via private contracts which prevent copying, duplication, etc from occurring?

There seems to be no need to institute government enforced patents or copyrights. The same result can be achieved via private contracts.

But government protection has a downside that private contracts don’t. And that is that it can lead to many situations where property rights are violated.

I feel it is an error to assume Mises’ example is justification for copyrights and patents.

Andras February 26, 2009 at 9:52 am

@Newson,
Why are you focusing on Thatcher and not what she said?
Of course I had a vested interest, I hate to see my ideas stolen, very much like Newton.
Don’t you have a vested interest as well? However, the problem with IP socialists that they run out other peoples’ ideas.

Gary Hall February 26, 2009 at 11:12 am

http://www.inventnow.org/patent

Horrible website.

Samuel L. April 24, 2009 at 6:05 am

After reading this article, I feel that I really need more info. Could you share some more resources please?

From Skip Oliva:

The Art of the Tax Exemption

September 21, 2012 § Leave a Comment

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. [↩]

A recent post by David Friedman, Libertarian Books: Sales vs Downloads, called to my attention a recent website, Patrick McEwen’sTop LibertarianBooks, which collects the top 100 libertarian books “Based on the current Amazon book sales rank” (current listing pasted below). This calls to mind a previous ranking, The Most Visited Libertarian Websites, in which various sites I am associated with or run are features, such as StephanKinsella.com (#84), Libertarian Papers (#100), The Libertarian Standard (#75), and Center for the Study of Innovative Freedom (C4SIF, #78). In the book list, my Against Intellectual Property was ranked #89, which is “gratifying” (h/t Robert Bork), and the Hoppe Festschrift I co-edited was ranked at #99. The list also featured, as expected, works by Rand, Friedman, and several by  Rothbard, Jeff Tucker, and Hoppe, as well as Boldrin & Levine’s Against Intellectual Monopoly. Good signs!

[continue reading…]

From Mike Masnick at Techdirt:

If You Were A Tree… What Kind Of IP Protection Could You Get?

from the copyfraud-and-confusion dept

drewmo wrote in telling us:

“A friend of mine just posted a photo of the Lone Cypress in Pebble Beach and included a note saying, “Evidently, I can’t sell this image. pebble beach owns the rights.” From what I know about photography copyrights in the U.S., that’s completely incorrect.

He also pointed us to this other image (not the one his friend took) of the same tree, with an explanation claiming that there are signs nearby saying that you can’t take photographs of the tree and then sell them:

Read more>>

From Slashdot:

Art School’s Expensive Art History Textbook Contains No Actual Art

Posted by samzenpuson Thursday September 20, @12:27AM
from the insert-image-here dept.

Dr Herbert West writes“Students at Ontario College of Art and Design were forced to buy a $180 textbook filled with blank squares. Instead of images of paintings and sculpture throughout history (that presumably would fall under fair-use) the textbook for ‘Global Visual and Material Culture: Prehistory to 1800’ features placeholders with a link to an online image. A letter from the school’s dean stated that had they decided to clear all the images for copyright to print, the book would have cost a whopping $800. The screengrabs are pretty hilarious, or depressing, depending on your point of view.”

This is even more absurd and outrageous—I think—than the Authors Guild lawsuit to to stop universities from providing access to orphaned works, in the name of “copyright” belonging to some unknown owners (see The Authors Guild versus Amazon’s Kindle Lending Program; How to keep orphaned books orphans).

Can we just get rid of copyright law now, please?