Breaking the “IP” Taboo

I must admit having found Jeffrey Tucker’s November 19, 2009 lecture on the Evils of Intellectual Property to be a relief. Like so many others, I never was able to embrace the concept of so-called “intellectual property”. I think I never bothered to think it through, but something just didn’t feel right about it, particularly in a world in which the suppression of critical information is so commonplace.

In this context I feel particularly lucky to be alive in China, a country whose government has seldom made serious efforts to uphold this fiction. Still though, I have yet to hear anyone in China publicly challenge “IP”, despite the obvious fact that China is living proof of the economic vitality connected with its rejection. People who imagine that China’s product innovations are all mere copies of Western templates are seriously mistaken: in industry after industry the reality is that most innovation has long since moved to China. Why? Not because Chinese are any smarter than their counterparts abroad. The reason is far simpler – operating in an environment where patents play only a very limited role, they are simply infinitely freer. Freedom pays high dividends in terms of economic success.

Writing about Michele Boldrin and David Levine’s 2008 tome Against Intellectual Monopoly on the Mises Institute site, Jeffery Tucker writes:

Copyright and patents are not part of the natural competitive order. They are products of positive law and legislation, imposed at the behest of market winners as a means of excluding competition. They are products of positive law and legislation, imposed at the behest of market winners as a means of excluding competition. They are government grants of monopolies, and, as neoclassical economists with a promarket disposition, the authors are against monopoly because it raises prices, generates economic stagnation, inhibits innovation, robs consumers, and rewards special interests.

What they have done is apply this conventional model of monopoly to one of the most long-lasting, old-world forms of mercantilist/monopolistic institutional privilege, a surviving form of mercantilist privilege of the 16th century. IP is like a dam in the river of development, or perhaps very large boulders that impede the flow.

The Mises Institute’s choice to make a definitive and enduring break with the concept of intellectual property is striking. Not because they need fear any serious intellectual challenges to their positions; rather, because an open attack on “IP” is so rare. Almost unheard of.

Ideas are acts of creation which represent our primary contributions to posterity; perhaps one could even say that they are a quintessence of life. Life means growth and change, the opposite of prison and stagnation. In this light, if one considers the matter dispassionately, the concept that one can imprison an idea seems a bit preposterous. And so it is – nothing more than a fictitious construction which is destined for the trash heap of history.

Why People Cling to the Idea of IP

Of course no matter how preposterous, many people will no doubt cling to this idea for decades to come. Some may even recognize the ultimate futility of efforts to keep ideas in chains, yet still view this fact as unfortunate. This is, in my opinion, principally due to two factors:

1) unsubstantiated pro-IP utilitarian propaganda, and
2) a severe confusion of concepts.

Utilitarian Arguments – Fact vs Fiction

Though utilitarian arguments are perhaps less important in the overall scheme of things, thanks to the repetition effect they tend to be quite prominent in the minds of many. Moreover, in my experience if I don’t address this issue first, the conceptual arguments are often ignored. 

The basic gist of this argument is that IP is necessary to stimulate creativity, or in other words, to “pay for inventions”. The image is of the solitary inventor whose makes millions from Invention X.

The reality is quite different. First of all, these days most patents are filed for defensive reasons – i.e. to prevent others from patenting something first. North America and Western Europe are drowning in them, with over 1 million patent applications filed each year. In today’s world, effective patent protection requires filing in multiple countries, something which takes substantial resources, resources which larger companies are much more likely to have. Second, even if a patent is obtained, small inventors seldom have the legal power to enforce patent protection.

Moreover, smaller companies and inventors are quite unlikely to have the resources to determine if that new Invention X might be violating some other company’s patent, thus drastically discouraging innovation instead of promoting it.

So who primarily profits from the system? The entrenched big boys, of course.

Is then this development perhaps merely a modern deformation of something which worked well in the “old days”? Far from it. On the contrary, the system has always worked that way, despite the notable failure of history books to reflect this. While this can be demonstrated using countless examples, in my experience a retelling of the much glorified Wright Brothers story tends to provide sufficient shock value. As Michele Boldrin and David Levine recount:

Despite their own rather modest contribution to the development of the airplane, in 1902 they [the Wright Brothers] managed to obtain a patent covering (in their view) virtually anything resembling an airplane. However, rather than take advantage of their legal monopoly by developing, promoting and selling the airplane, they kept it under wraps, refusing formany years even to show it to prospective purchasers. However,while refusing to devote any effort to selling their own airplane, they did invest an enormous amount of effort in legal actions to prevent others, such as Glenn Curtis, from selling airplanes. Fortunately for the history of aviation, the Wright brothers had little legal clout in France, where airplane development began in earnest in about 1907.

In the world of the written word a similar pattern holds. Publishers of heavily promoted blockbuster books tend to strongly IP protection; publishers of less well-known fare tend to be much more interested in getting the word out. In China certainly, when unauthorized copies of your book are being sold on street corners, you know you have arrived. 

The Chinese fiction market provides a good example of the type of innovation which results when a market is freed from focusing on copyright protection. In the past 7+ years, countless talented new writers have found readers and become well-paid writers thanks to the new web-based fiction site industry. Here’s how it works: Aspiring writers sign up to sites such as Jinjiang where they post the initial chapters to one or more books. Higher rated authors can then get paid if readers wish to read the later chapters in their books. They can also earn income from printed paper versions. Apparently the list of new authors with substantial incomes from this arrangement is quite long.

Conceptual Arguments – Fact vs. Fiction

Once one realizes the hollow nature of the utilitarian arguments, it becomes easier to see that the same hollowness is echoed on a conceptual level. Real-life ideas are never one-time events; rather, they come interlinked with countless other variations and offshoots. They are always subject to development. They are built on millions of ideas of others preceding us, and form but one link between the past and the future. It is the PRODUCTION of ideas – their “life” as it were – which represents true value; not the “idea” itself. Sort of like the difference between life viewed through a light microscope and that viewed through an electron microscope. So keep producing them, and you will be valuable.

Second, two concepts – one real phenomenon and one fiction – have been confusingly mixed together.

The “real” phenomenon is that I can – and do – control the way in which my ideas are propagated to the rest of humanity. I can, for example, create a license server to limit copying of software which I have written. I can choose to write a blog, or write a book, or give an interview. Or I can choose to wait a year to do anything at all.

The “fiction” is that of government-enforced “copyrights” and “patents”. If such claims are to be believed, various governments around the world claim that their use of guns and lawyers will keep ideas in their appointed prison cells.

These two concepts have nothing to do with one another, but their co-existence often leads to understandable confusion. The truth is that the hopeless attempt to control ideas with guns has nothing to do with each individual’s decisions about how to propagate his or her thoughts. The Chinese economy is living proof of this.

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6 Responses to Breaking the “IP” Taboo

  1. two_worlder says:

    at what point does “IP” cross the line and become “art”?

    you use varied examples in your thesis – the wright brothers built a flying machine, an idea of how something could work, but not the only way and certainly others could duplicate a machine capable of flight, but chinese fiction is not an “idea”, it is a singular work of art.

    should works of art, which required talent and time and effort to create them be simply duplicated in unlimited quantities by anyone with the mechanical skills to do so?

    being the first to copy something is also in it’s own way a form of showing off, so people will do it just to be the first.

    in your comic book example above, the first single copy of the work purchased could turn into the freely available version, short-curcuiting the revenue model you describe. as tools for this duplication and communication gets faster, the models break down even faster.

    are you in the end saying that works of art are unprotectable by any means? that may work in a future society where people are rewarded by their contributions to society, but today we still use money, and to be fairly compensated for your talent time and effort seems like something worth supporting. your dismissing of the idea of protecting works of art hurts the big as well as the small players.

    however i agree with you on the nonsense of a patent on an “idea” of doing something a certain way. if all car makers legally had to put the steering wheel in a different place, there would be chaos, however they can build a car any way they wish to while sharing many of the things that make them useful to us.

    • Ponderer says:

      You ask if works of art “should” be “duplicated in unlimited quantities”.

      It seems to me that questions of “should” or “should not” are essentially moral questions, not economic ones. My question is an economic one: If consequently implemented, is or is not so-called ‘IP’ compatible with a free-market economy? The answer seems to be a categorical ‘no’. Free markets economies which have IP laws can only continue to grow to the extent that they fail to implement those laws. Conversely, the stricter the degree to which these selfsame laws are implemented, the more growth and innovation grind to a halt.

      While there is nothing that says that morals must follow the laws of economics, history does certainly show favoritism.

      It is probably true that going forward in the Internet age no revenue model based on selling content is likely to be sustainable forever. Conditions will change and so will the business models. In the case of the current Chinese fiction novel systems such as the Jinjiang model mentioned above, I would guess that the charges are so low that many readers do not find it worthwhile to go looking for other sources. For a very reasonable rate they get each new chapter as it arrives on Jinjiang’s site.

      In any case the point is that viable models compatible with a free-market economy DO exist without the need to resort to calling in the troops.

      As to the concept of “fairness” which you raise, I would say that “fair compensation” in a truly market-based economy is different for each individual and company. It is a function of the perception of the buyer plus at least one seller. If the buyer wishes to buy at a given price and at least one seller wishes to sell, then that is a “fair” price. This would be even true if, say, the seller were selling fenced (stolen) goods. For each and every individual/company it is equivalent to the quantity of his/her preferred accounting unit (gold, dollars, yuan etc.) which he/she would willingly trade for the goods or services of another person or entity. If a consumer acquires a bunch of content as part of a package deal in conjunction with his/her payment for Internet service, then THAT is the “fair” market price.

      • two_worlder says:

        the law (in the USA anyway) currently clearly indicates that the selling of stolen goods is illegal. whether they are physical or digital goods makes no difference, they are both defined as property and probably should be protected in some way. i have no idea what that way is, but the creator should certainly give this some thought, as the old models are dying because everyone has the ability to “steal” the digital property of others with the flick of a mouse, and it is not a good business model to restrict the choices of your target customer. the art creator should do what they can to balance the level of exposure desired with the business model they choose.

        it also seems to me that if you think taking someones digital property should be legal, then taking their physical property would also be legal under that model because it will help the economy as you replace the stolen items and the thief makes money from the resale of your goods – everybody wins – right?

        people should protect their digital property equally to their physical property if they don’t want to lose it.

    • Ponderer says:

      Two worlder raises a good point.

      It is understandable that for many this “should” issue is THE #1 issue. Yet, understandable or not, a focus on the “should” issue tends to obscure one’s view of the economics of the matter.

      While I don’t recall any reference to IP in, say, the Bible or the Koran, no doubt many people include an adherence to this concept in their own personal “moral code”. Do they perhaps stem from the childhood internalization of heavily promoted legal concepts?

      Be that as it may, a discussion of morals would exceed the scope of this article. Morals are a different matter entirely, and given the wide range of moral conceptions hardly a limited one either. In medieval Europe the charging of interest was considered to be immoral, a state of affairs which still applies to some countries today. In other times and places the charging of interest became a lynchpin of the economic system. The same is true of slavery. The changing nature and wide range of moral precepts makes them into a slippery slope to tackle.

      The focus of this article is simpler: the question what makes economic sense.

      • two_worlder says:

        last time i checked, the phrase “thou shalt not steal” was a part of the bible. i think the only problem in this discussion is the definition of the word “property”, which i’m pretty sure was the object of the aforementioned “steal”ing.

        to the point of economic benefit – economic benefit for whom exactly? who exactly benefits in this scenario where digital arts are considered valueless and the property of none?

    • Ponderer says:

      I agree. For those with a Ten Commandments frame of reference, the key question is likely to be: “What is property?”

      As to the second question (“who benefits”), that is doubtless a topic worthy of consideration. From a long-term perspective, the obvious answer from history would seem to be all of human society and mankind.

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