logo

Against Monopoly

defending the right to innovate

Is IP Property

Monopoly corrupts. Absolute monopoly corrupts absolutely.





Copyright Notice: We don't think much of copyright, so you can do what you want with the content on this blog. Of course we are hungry for publicity, so we would be pleased if you avoided plagiarism and gave us credit for what we have written. We encourage you not to impose copyright restrictions on your "derivative" works, but we won't try to stop you. For the legally or statist minded, you can consider yourself subject to a Creative Commons Attribution License.


Rand on IP, Owning "Values", and "Rearrangement Rights"

In Jeff Tucker's superb article If You Believe in IP, How Do You Teach Others?, he notes Rand's increasing focus on exalting the creator and elevating "intellectual rights" to such a height that they totally trump real rights. This is no exaggeration. As I noted in Against Intellectual Property, Rand actually, incredibly said that "patents are the heart and core of property rights." See also my post Inventors are Like Unto .... GODS....., noting Objectivist IP attorney Murray Franck approvingly repeating this quote: "intellectual property is after all the only absolute possession in the world."

So, yes, Objectivists focus on the creation of value, and thus in rights in value, and explicitly drop the connection between property rights and scarcity. As I note in footnote 76 of Against Intellectual Property, Objectivist David Kelley wrote:

Property rights are required because man needs to support his life by the use of his reason. The primary task in this regard is to create values that satisfy human needs, rather than relying on what we find in nature, as animals do. . . . [T]he essential basis of property rights lies in the phenomenon of creating value. . . . Scarcity becomes a relevant issue when we consider the use of things in nature, such as land, as inputs to the process of creating value. As a general rule, I would say that two conditions are required in order to appropriate things in nature and make them one's property: (1) one must put them to some productive use, and (2) that productive use must require exclusive control over them, i.e., the right to exclude others. . . . Condition (2) holds only when the resource is scarce. But for things that one has created, such as a new product, one's act of creation is the source of the right, regardless of scarcity. [emphasis added]
Letter on Intellectual Property Rights, IOS Journal 5, no. 2 (June 1995), pp. 12-13 (including: David Kelley, "Response to Kinsella," IOS Journal 5, no. 2 (June 1995), p. 13; and Murray I. Franck, "Intellectual and Personality Property," IOS Journal 5, no. 3 September 1995), p. 7.

Thus, Objectivists will talk about man creating values. For them "a value" is a thing that exists; it's what you "create". For the Austrian and Austro-libertarian, you don't talk about "a value" as if it's an existing thing that you create. I don't make a value. For us, it's more of a verb: we value things as ends or as means to ends. We can make something more valuable by transforming it, but we do not create new property when we do this. As discussed in Intellectual Property and Libertarianism, creation is an important means of increasing wealth. As Hoppe has observed,

One can acquire and increase wealth either through homesteading, production and contractual exchange, or by expropriating and exploiting homesteaders, producers, or contractual exchangers. There are no other ways. [Hans-Hermann Hoppe, "Banking, Nation States and International Politics: A Sociological Reconstruction of the Present Economic Order,"Download PDF Review of Austrian Economics 4 (1990): pp. 55-87, p. 60. Emphasis added.]

While production or creation may be a means of gaining "wealth," it is not an independent source of ownership or rights. Production is not the creation of new matter; it is the transformation of things from one form to another the transformation of things someone already owns, either the producer or someone else.

By viewing "values" as things that we create, Objectivists then think there should be property rights in values. They are things, after all, right? But this is a fundamental mistake. As I noted in Objectivist Law Prof Mossoff on Copyright; or, the Misuse of Labor, Value, and Creation Metaphors, a common mistaken belief is that one has a property right in the value, as opposed to the physical integrity of, one's property. For elaboration, see pp. 139-141 of Hoppe's A Theory of Socialism and Capitalism; also see my comments re same to Patents and Utilitarian Thinking. This assumption sneaks into or lies at the basis of many fallacious notions of property rights, such as the idea that there is a right to a reputation because it can have value. It ties in with the (especially Randian) notion of "creation" as the source of rights, and the confusing admixture of the "labor" idea, when we talk about using our labor to "create" things of "value" (like reputations, inventions, works of art). As Hoppe notes in The Economics and Ethics of Private Property:

According to this understanding of private property, property ownership means the exclusive control of a particular person over specific physical objects and spaces. Conversely, property rights invasion means the uninvited physical damage or diminution of things and territories owned by other persons. In contrast, a widely held view holds that the damage or diminution of the value (or price) of someone's property also constitutes a punishable offense.As far as the (in)compatibility of both positions is concerned, it is easy to recognize that nearly every action of an individual can alter the value (price) of someone else's property. For example, when person A enters the labor or the marriage market, this may change the value of B in these markets. And when A changes his relative valuations of beer and bread, or if A himself decides to become a brewer or baker, this changes the value of the property of other brewers and bakers. According to the view that value damage constitutes a rights violation, A would be committing a punishable offense vis--vis brewers or bakers. If A is guilty, then B and the brewers and bakers must have the right to defend themselves against A's actions, and their defensive actions can only consist of physical invasions of A and his property. B must be permitted to physically prohibit A from entering the labor or marriage market; the brewers and bakers must be permitted to physically prevent A from spending his money as he sees fit. However, in this case the physical damage or diminution of the property of others cannot be viewed as a punishable offense. Since physical invasion and diminution are defensive actions, they are legitimate. Conversely, if physical damage and diminution constitute a rights violation, then B or the brewers and bakers do not have the right to defend themselves against A's actions, for his actions - his entering of the labor and marriage market, his altered evaluation of beer and bread, or his opening of a brewery or bakery - do not affect B's bodily integrity or the physical integrity of the property of brewers or bakers. If they physically defend themselves nonetheless, then the right to defense would lie with A. In that case, however, it can not be regarded as a punishable offense if one alters the value of other people's property. A third possibility does not exist.

Both ideas of property rights are not only incompatible, however. The alternative view - that one could be the owner of the value or price of scarce goods - is indefensible. While a person has control over whether or not his actions will change the physical properties of another's property, he has no control over whether or not his actions affect the value (or price) of another's property. This is determined by other individuals and their evaluations. Consequently, it would be impossible to know in advance whether or not one's planned actions were legitimate. The entire population would have to be interrogated to assure that one's actions would not damage the value of someone else's property, and one could not begin to act until a universal consensus had been reached. Mankind would die out long before this assumption could ever be fulfilled.

Moreover, the assertion that one has a property right in the value of things involves a contradiction, for in order to claim this proposition to be valid - universally agreeable - it would have to be assumed that it is permissible to act before agreement is reached. Otherwise, it would be impossible to ever propose anything However, if one is permitted to assert a proposition - and no one could deny this without running into contradictions - then this is only possible because physical property borders exist, i.e., borders which everyone can recognize and ascertain independently and in complete ignorance of others' subjective valuations.

Rand did have insights that militated against property rights in "values"; as she once wrote:
The power to rearrange the combinations of natural elements is the only creative power man possesses. It is an enormous and glorious power and it is the only meaning of the concept "creative." "Creation" does not (and metaphysically cannot) mean the power to bring something into existence out of nothing. "Creation" means the power to bring into existence an arrangement (or combination or integration) of natural elements that had not existed before.
She should have realized that this means there cannot be property rights in value since this would have to mean property rights in arrangements or patterns, which would then give the owner of the arrangement rights in other people's already-owned property. If she had kept her focus on the fact that rearranging already-existing property can indeed make that property more valuable, she would have realized that creation (rearrangement) is not an independent source of property rights: if you rearrange your own property, even if this makes it more valuable, you already owned the property that you have rearranged (made more valuable). Yet this does not give you rights in other people's property. You can re-word the Randian view as follows: if you make your property more valuable, it gives you additional property rights--the right to prevent other people from making their own property more valuable. And this makes it all the more obviously flawed.

This is where the Misesian approach to subjectivist value makes sense: things have value to a valuer; values do not exist independently as free-floating things that can themselves be owned. And again, Rand should have recognized this; e.g., she once wrote, "Material objects as such have neither value nor disvalue; they acquire value-significance only in regard to a living being particularly, in regard to serving or hindering man's goals." (For more on the compatibility between Objectivism and Austrian economics, see Mises and Rand (and Rothbard); Randian Hoppe(?), Austrian Rand(?).) So she should have realized that if rearranging owned property makes the owner or potential buyers value the object more, it does not mean there is any additional thing created for which we need to find an owner.

I think a similar mistake is made by Tibor Machan. Rand slips into thinking of values as ownable things because she thinks of values as created things, rather than thinking of it as a verb: people value things (and demonstrate this preference or valuing in action). I'm sure Machan would disagree with my way or framing his argument, but his argument, to me, seems to say that if you can have a concept for some"thing", or a name or word for "it," then it's an ontological "type of thing," and after all, if you create this thing, why shouldn't you be "its" owner? The problem (For more on this, see New Working Paper: Machan on IP; Owning Thoughts and Labor; this comment to "Trademark and Fraud"; Libertarian Creationism; also Elaborations on Randian IP and Objectivists on IP.)

http://aynrandlexicon.com/lexicon/creation.html

Tabarrok Review of Against Intellectual Monopoly

On Marginal Revolution, Alex Tabarrok reviews Boldrin & Levine's Against Intellectual Monopoly. According to Tabarrok, the book "is a relentless, pounding, take no prisoners attack on patent and copyright law. It joins Lessig's Free Culture and Heller's The Gridlock Economy as an instant classic and a must-read on these issues."

I don't know much about Tabarrok but as he has published in the libertarian journal Reason Papers, in The Free Market, and has writen some libertarian-ish sounding books published by the libertarian Independent Institute (and positively reviewed in the QJAE). So I assumed he was a libertarian. But here, though he seems to recognize some (practical) problems with patent and copyright, he doesn't want to abolish the state IP system altogether.

You see, "there is a Laffer curve for innovation - more appropriability increases innovation at first but innovation declines when appropriability extends too far." So though he agrees "with Boldrin and Levine that rent-seeking has put us on the wrong side of the Laffer curve for innovation," we should not abolish IP either. We need to try to "optimize" it, I suppose. Alas, "there is no invisible hand theorem which moves us automatically to the top of the curve".

So, though it's apparently politically impossible ever to "optimize" IP protection, to ensure that we are not "on the wrong side of the Laffer curve for innovation", and economically impossible to know we had reached this point anyway--nonetheless, wealth-maximizers like Tabarrok soldier on, advocating keeping a state-run IP system. So what should we do? "We need to reduce intellectual monopoly with patent reform, less copyright protection, and a greater use of patent substitutes like prizes." In the linked post, Tabarrok writes that he "might actually sign on to" The Medical Innovation Prize Fund Act of 2007, introduced by socialist Senator Bernie Sanders ... a bill which would not even abolish patents, but which would augment the patent system with a taxpayer-funded "medical innovation prize fund"--starting at "$80 billion per year, and increas[ing] with the growth in GDP"... ! Damn, $80 billion down the drain--puts my own little estimate that the patent system imposes around $28 billion in costs to shame!

Advocating state-funded "prizes" is about as unlibertarian as proposal as you'll see. And you don't need to do "marginal analysis" to figure that one out.

***

Update: Tabarrok here advocates using taxpayer funds to pay patentees to give up the patent rights that the federal government grants them. Why not just ... refrain from giving them the patent right in the first place? Because that would cause an "underproduction" of "innovation", by reducing "appropriability." Whatever. So he has to find a way to keep "appopriability high," and thus cannot give up a patent monopoly, or a tax-funded "subsitute" for it.

Anyway, note that the annual $80 billion taxpayer-subsidized fund--well, probably at least $82 billion by now, if we account for GDP growth since 2007, as Sanders and Tabarrok want to -- is for medical innovation only. This covers only a small slice of all patent innovation--in fact the "prize fund" also covers "non-patented products"--because, due to the patent system, "innovations without property rights are underfunded". So consider what this means. If we subsidize medical innovation to the tune of $82B a year, there is no reason not to subsidize other patentable--and even non-patentable--inventive areas. Hell, why stop there? Inventions are not the only types of innovation that should be rewarded. What about the copyright fields, like novels, painting, website design? And other areas of innovation, like boat hull designs and databases? And semiconductor maskworks, and trade secrets? And what about more fundamental research in the basic sciences? Let's see, I think the $82B for medical innovation is at most, say, 10% of all technical innovation. So we need another $820B for other technical fields. And surely the value of the artistic, boat hull design, semiconductor maskwork, and database works are at least on the same order of magnitude as the technicall innovations. So let's say it's another $ trillion, for $2 trillion. A year. To start. Now, what about basic science--physics, math, astronomy? Who can put a value on that? Well, I guess we have to--say, another cool $300B. And what about trademarks? My heavens, they are worth at least as much as patent and copyright, so let's add another trillion. So now we are up to $3.3 trillion. This is in addition to our current $2.5 trillion federal budget. So now the federal budget is, say, $6 trillion, out of about $14 trillion GDP. I'm sure our good marginal economists will assure us that this expenditure will increase appropriability--which will increase innovation, which will have a measurable value--and that this extra value will far exceed the $10 trillion or so that would need to be generated to just break even (assuming 35% of the extra wealth is taxed to replenish the $3.5T annual prize fund). Wow, what a great way to reach a $24 trillion GDP--just increase taxes by $3.5 trillion!! Genius! This never occurred to me. No wonder I'm not an economist.

Update 2:

And get this: according to the text of socialist Sanders's draft bill, the $80 billion+ taxpayer-funded "Fund for Medical Innovation Prizes" will be administed by a "Board of Trustees for the Fund for Medical Innovation Prizes," composed of 13 members serving 4-year terms. The 13 members of the Board are:

(1) the Administrator of the Centers for Medicare & Medicaid Services; (2) the Commissioner of Food and Drugs; (3) the Director of the National Institutes of Health; (4) the Director of the Centers for Disease Control and Prevention; and (5) nine individuals to be appointed by the President, with the advice and consent of the Senate, of which: (A) three representatives of the business sector; (B) three representatives of the private medical research and development sector, including at least one representative of the non-profit private medical research and development sector; and (C) three representatives of consumer and patient interests, including at least one representative of patients suffering from orphan diseases.
Each Board member will be paid at the equivalent of an annual salary of about $140k for daily service. They'll of course have expenses paid, and a staff, and budget to hire experts and consultants.

And every year, the Fund gets public funding equal to "0.6 percent of the gross 6 domestic product of the United States for the preceding fiscal year."

Jesus, this is pure evil.

(Cross-posted at Mises Blog)


   

Most Recent Comments

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

French firm has patents on using computers to choose medical treatment 1

Copyright batte over 'unauthorized' Catcher in the Rye commentary 1

Copyright batte over 'unauthorized' Catcher in the Rye commentary 1