Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.

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Dean Baker's book would reform IP

It is heartening to find more and more critics of our intellectual property regime, partly as a result of growing knowledge but more importantly, the growing critical reaction to the extreme excesses of the application of the law. A new voice for me is that of Dean Baker, co-director of the Center for Economic and Policy Research in Washington, DC. whose book, THE CONSERVATIVE NANNY STATE; How the Wealthy Use the Government to Stay Rich and Get Richer, is available for download on line link here under a Creative Commons license. The book is about much more than IP, as the subtitle indicates, but this review focuses on the IP issues Baker covers. He calls the chapter, "Bill Gates Welfare Mom: How Government Patent and Copyright Monopolies Enrich the Rich and Distort the Economy".

He begins by examining the richest man in the world, Bill Gates, and Microsoft, noting that it was not Gates hard work or brilliance, or the superiority of his software, but his government provided monopoly based on IP law that made him today's Croesus.

The heart of Baker's argument is that the same situation applies to patent protection in the pharmaceutical industry, and copyright protection in the entertainment industry. Vast segments of the economy are dependent on government-enforced monopolies for their profitability and survival. "In the case of prescription drugs, patent monopolies raise the average price of protected drugs by more than 200 percent, and in some cases by as much as 5,000 percent." "In the case of copyright protection, items like software and recorded music and movies that would otherwise be available at zero cost over the Internet, can instead be sold for hundreds of dollars. Clearly these forms of protection are substantial interventions in the economy."

He goes on, "The government is not obligated to award patent and copyright protection; it only makes sense if these are the best ways to promote innovation and creativity." "Copyright and patent protection support a $220 billion a year prescription drug industry, a $25 billion medical supply industry, a $12 billion recorded music industry, a $25 billion movie industry, and a $12 billion textbook industry. According to the International Intellectual Property Alliance, industries that rely heavily on copyright and patent protection accounted for $630 billion of value added in 2002, almost 6 percent of the size of the economy."

Baker's more original argument is that IP does provide an incentive for innovation as the constitution requires, but that there are less costly ways of doing so. He does so in a section titled "Efficient Mechanisms for Supporting Innovation and Creative Work".

He opens with an example, that "patent-protected brand drugs sell for more than three times the price of generic drugs that sell in a free market. This means that the country could save approximately $140 billion a year on its $220 billion annual bill for prescription drugs if the government did not provide patent protection and drugs were instead sold in a competitive market." The country could save much of that, if the research were carried on by the government, as in fact much of it already is (though to the gain of IP owner).

Baker next turns to copyright and singles out the textbook racket for close attention, arguing that revised texts are constantly being marketed with little real change in substance and at great cost. Again he would turn to the government to fund standard texts, but would allow copyrighted versions as well, which would have to find their place in a freely competitive market.

For the broader class of copyrighted material, Baker suggests a voucher system in which individuals would be given a set value of vouchers that he could credit to one or more artists. They in turn would put their creations on the internet, making them free to download. If the artist wants to copyright his work and sell it at whatever the market will bear, he could alternatively do that.

Baker ends by noting that these may not be the best alternatives to patents and copyrights, but that alternatives need to be explored.

The rest of Baker's book is ideological and will put off any who are not self identified progressives or liberals. But his basic argument is that conservatives have framed the issues in terms that they would keep the government out of much of the economy but that this is a lie. For Baker, the issue is that the government intervenes for the rich to the cost of for everyone else.


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