Goods, Scarce and Nonscarce

In the UK there is little if any discussion on Intellectual Property Law. I think it would be correct to say that it would be considered a backwater of law for specialists and of not much relevance to the better running of society . Tucker and Kinsella, in this article, put IP law at the very heart of the advancement of a free society. Most readers of this site will know and understand that private property rights exist only when there are scarce goods, but what of goods where there is no limit to them such as an idea, or a copy of an original bit of digital data? They argue conclusively that these are truly free goods and that there is no ethical, moral or philosophical justification for the coercive restrictions on the use of these free goods. This may well be a challenging read to your commonly perceived views, but well worth a read no less.

As I reflect on this article and what this would mean to wealth creation is that if all IP laws were removed, we would unleash a tsunami of intellectual excellence that has been applied (restricted and protected thus limiting its use) in a proven fashion by entrepreneurs, in technological improvement for example, that would massively benefit more people.

I spend my time explaining to monetarists and underconsumptionist crackpots how wealth is really created:

You can only create wealth in society by entrepreneurs thinking about new ways to mix existing factors of production in better ways, by invariably investing in more intense capitalistic methods of production to produce better more plentiful and cheaper goods and services.  No amount of increasing the money unit or taking from existing pools of wealth to spend via the government will create wealth; only entrepreneurs will, by going though this continuous process over time. Government should get as far away from this process as possible by not taxing corporate profits, not taxing wealth transfers from one generation to the next, not trying to “pick winners” via an Industrial Strategy, and not imposing rules and regulations over and above standard common law protections for consumers.

Now I will add “not giving monopoly privilege to creators of technology, ideas and know-how, as this prevents their widespread application; these are unlimited free goods, do not need to be economised, therefore they should not have property rights attached to them.”

10 Comments

  • Bryan Niblett says:

    Dear Toby Baxendale,

    There is, as a matter of fact, a great deal of discussion on intellectual property law in the United Kingdom.

    It is not so that the rationale for private property is the scarcity of goods. The reason for private property is that a man is morally entitled to that which he brings into being and property laws are necessary to give him freedom of action in the domain of the property he has created.

    I recommend that you read John Locke’s Second Treatise on Civil Government(a great work) where he explains all this.

    By the way, I enthusiastically support the objects of the Cobden Centre.

    Best of regards, Bryan Niblett.

  • Current says:

    I’m not persuaded by the natural law arguments for or against intellectual property.

    I think that from a utilitarian standpoint though there is a good argument for it. If there is no way to be rewarded for the creation of software (for example) then less software will be created.

    I’m a fan of open-source software, I’ve used it for many years and I’m in the process of writing a bit of it myself. But, I don’t think it can serve the whole software market.

    • mrg says:

      I agree that there is a strong utilitarian argument for some form of intellectual property. The quality and quantity of books, movies, and music would drop off significantly if content producers were unable to charge for their creations.

      While I would favour some intellectual property rights for software (someone who steals my source code should not be free to profit from it), I am strongly opposed to US-style software patents.

      In the world of software, it is extremely common for multiple parties to independently arrive at the same good idea, and be in a position to implement it.

      Paul Graham argues that the problem is the patent office, rather than the principle of software patents:

      Whenever software meets government, bad things happen, because software changes fast and government changes slow. The patent office has been overwhelmed by both the volume and the novelty of applications for software patents, and as a result they’ve made a lot of mistakes.

      The most common is to grant patents that shouldn’t be granted. To be patentable, an invention has to be more than new. It also has to be non-obvious. And this, especially, is where the USPTO has been dropping the ball. Slashdot has an icon that expresses the problem vividly: a knife and fork with the words “patent pending” superimposed.

      There’s undoubtedly some truth to this, but as Graham goes on to acknowledge, it is unlikely that the patent office will ever do a good job with software:

      We, as hackers, know the USPTO is letting people patent the knives and forks of our world. The problem is, the USPTO are not hackers. They’re probably good at judging new inventions for casting steel or grinding lenses, but they don’t understand software yet.

      At this point an optimist would be tempted to add “but they will eventually.” Unfortunately that might not be true. The problem with software patents is an instance of a more general one: the patent office takes a while to understand new technology. If so, this problem will only get worse, because the rate of technological change seems to be increasing. In thirty years, the patent office may understand the sort of things we now patent as software, but there will be other new types of inventions they understand even less.

      Although I haven’t thought about the problem nearly enough, my instinct is that patents in general do more harm than good. Other forms of intellectual property, such as copyright, are much more defensible.

  • @Bryan Niblett:

    “The reason for private property is that a man is morally entitled to that which he brings into being and property laws are necessary to give him freedom of action in the domain of the property he has created.

    “I recommend that you read John Locke’s Second Treatise on Civil Government(a great work) where he explains all this.”

    The problem is the assumption that creation is an independent source of property rights. It is not. Creation is merely rearranging already-owned property into a more valuable configuration. Thus creation presupposes the things modified are already owned–and adds wealth, but not property rights. The only legitimate way to acquire property rights is by homesteading (appropriation) of unowned resources, or contractually from a previous owner.

    The fallacious “creationist” approach to property is mixed up with Locke’s imprecise and overly metaphorical comments about the “ownership” of labor–labor is just action; it’s something you do with your body, i.e. with your property. If I own my body and other this the ownership of these scarce resources gives me the power to use them–to act with them–as I see fit. To say I own this action (labor) is unnecessary and double-counting, and leads to confusion. Lockean homesteading works simply because by transforming and using an unowned resource first you establish a better claim to it; there is no need in this argument to assume that labor is “owned”. And thus, there is no basis for the creationist view that if you labor to make an information pattern that you own that pattern. Labor only serves as part of homesteading in that it is just the way human action transforms and thus emborders a previously-unowned scarce resource. That is, it presupposes we are talking about ownable things–that is, things that need property rights to prevent conflict over their use–that is, conflictable things, or sometimes as they are called, rivalrous, or “scarce.” Information is not an ownable thing at all. It may not be homesteaded at all. It is not “transformed” or embordered. Rather, information is what guides human action; by acting with respect to (laboring on) a scarce good, following information that guides one’s actions, one transforms that scarce good and emborders it, thus appropriating it to one’s estate. But the information only guides action. If you think of a new way to manipulate or use your property that is useful to you but you in no wise gain ownership of the information itself. Human action is use of scarce means to achieve ends, where the means selected and the manner in which they are employed, is guided by ideas or information. The means used are scarce and thus have to be owned by the actor in order to use these means; but it makes no sense, and there is no need, for the ideas that guide his actions to be “owned” by him–only I can use my eggs and bowl to make a cake, so I need to own these means; but I am not prevented from making my cake if a thousand other people simultaneously use the same recipe to make their own cakes.

    I discuss all this in my various IP writings at http://www.stephankinsella.com/publications/#IP; see also Locke, Smith, Marx and the Labor Theory of Value http://blog.mises.org/13064/lock-smith-marx-and-the-labor-theory-of-value/ and What Libertarianism Is, also http://blog.mises.org/11042/rand-on-ip-owning-values-and-rearrangement-rights/

    Current writes:

    “I think that from a utilitarian standpoint though there is a good argument for it. If there is no way to be rewarded for the creation of software (for example) then less software will be created.”

    The problem is this is always asserted by IP advocates but never proven. Forget for a moment that utilitarianism is methodologically flawed (value is ordinal not cardinal and not interpersonally comparable) and morally bankrupt (it’s immoral to steal from A to give to B even if A is richer, even if the money taken “means less” to A than it does to B).

    IP advocates have no proof that the marginal benefit of IP systems is greater than the cost of those systems. In fact they have no proof that there is marginal benefit at all. Studies so far tend to be inconclusive or to conclude that innovation is on net diminished by IP law.
    See my comments in this respect to David Friedman here:
    http://www.stephankinsella.com/2010/08/18/volokhs-david-post-the-high-cost-of-copyright/comment-page-1/#comment-73095

    see also :
    http://blog.mises.org/10217/yet-another-study-finds-patents-do-not-encourage-innovation/ and Reducing the Cost of IP Law, and There’s No Such Thing as a Free Patent

    • mrg says:

      There’s a big difference between software ideas (which are cheap) and fully functioning software (which is expensive).

      I don’t support software patents, but I do support software licence agreements. These are legitimate contracts between buyers and sellers, and they should be enforceable by law.

      If someone circumvents licence restrictions on a piece of software, or steals the source code, they have deprived the software author of legitimate income. That the collection of bits representing the software is non-scarce (easily copied) is irrelevant. The value is in the software, not the physical media on which it resides.

      Can you clarify your position on this matter?

  • mrg: Of course, the way a given object is configured or arranged affects how they function and their utility, and thus how and why people value them. Sure.

    Of course contracts should be upheld, since property rights should be respected. A couple of caveats. First, contracts are to be viewed as types of title transfers, not as binding promises; for more on this see my A Libertarian Theory of Contract: Title Transfer, Binding Promises, and Inalienability. Second, contracts cannot bind third parties, so there are limits to use of contract to try to create anything resembling modern legislated patent or copyright law. For more on this see the sections “The Limits of Contract” and “Contract vs. Reserved Rights” in my Against Intellectual Property.

    • mrg says:

      Thanks Stephan. I’m now part way through your Against Intellectual Property, and will read your Theory of Contract after that.

      AIP is certainly an interesting read, and I agree with much of it, but the inability of contracts to bind third parties seems like a good argument for some overarching law (universally understood) to protect commercial software. I appreciate that you can’t forget an idea (for a movie plot or for a mousetrap), and that in some cases it may not be clear whether IP restrictions apply, but anyone who downloads a copy of MS Office from a file-sharing site, or copies it from a friend, knows that they are doing something dodgy. They know that they are getting for free something that they should have to pay for. Ideas for software should not be protected, but the software itself (a fully functioning, recognisable entity) deserves protection.

      Besides software, the other area I’d expect to suffer in a world without IP would be drugs (pharmaceutical), as they’re expensive to develop, but easy to copy. In this case, short term patents seem like the right answer, despite the uncomfortable arbitrariness.

      I’ll read more, and see if all becomes clear. Thanks for your response, and the links.

  • mrg:
    Also give Against Intellectual Monopoly a read–a great book– free at http://www.againstmonopoly.org.

    “AIP is certainly an interesting read, and I agree with much of it, but the inability of contracts to bind third parties seems like a good argument for some overarching law (universally understood) to protect commercial software.”

    I’m glad you recognize that contract cannot extend to third parties and thus cannot itself justify IP law. To justify IP legislation, however, requires more than some sense that there is a “need” for it.

    “I appreciate that you can’t forget an idea (for a movie plot or for a mousetrap), and that in some cases it may not be clear whether IP restrictions apply, but anyone who downloads a copy of MS Office from a file-sharing site, or copies it from a friend, knows that they are doing something dodgy. They know that they are getting for free something that they should have to pay for.”

    Well, I understand there may be intuitions and feelings in this regard–although I would submit that this is at least in part influenced by the world-with-copyright that we live in and are used to. In industries where there is no IP protection–abstract math and physics ideas, facts, perfume scents, food recipes, fashion industry, and the institution of education itself–we are used to a free cultural exchange of information. In the areas where the state has granted monopolies we are used to the business models and practices that have grown up around these legal artifices. In any case, merely having a feeling or intuition that “something is dodgy” or you “should” pay for it, may be cause for further exploration but does not by itself suffice to justify state legislation granting artificial monopoly privileges.

  • Matt C says:

    mrg:
    You are being admirably open minded about this issue. Finishing AIP will be an eye-opener, I assure you.

    To see what’s wrong with your example of people downloading software and knowing that they’re “doing something dodgy”, just move it to a greyer area:

    Is someone who photocopies Ezra Pound’s “Cantos” doing something dodgy? Should she know she is doing something dodgy?

    How about Ezra Pound’s “Personae”? Same?

    Not the same: “Personae” (1909) is in the public domain and the Cantos (2962) will not be for quite some time.

    Anyone who’s unaware of the extent (the insane extent) of copyright law could be unsure about any of these cases.

    Should you become persuaded that “intellectual property” is an illegitimate category, you can decide for yourself whether it’s moral to copy things created by people who are not so persuaded. I personally do not; there’s plenty of freely-license software & music to suit my needs.

    If I absolutely *had to have something that was nonfree (Larie Anderson’s new record, maybe) I’d probably download it and send the purchase price directly to the artist. And I wouldn’t feel like I was doing anything remotely dodgy.

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