A theoretical debate broke out between two Austrian economists on intellectual property rights. Both parties are famous in economics, so it is a useful listen. But neither includes the merchants' anti-IPR view, and so I’ll quote someone who summarized the debate and comment.
14) Wenzel asks Kinsella if his Drudge formula is superabundant and asks why it is not scarce. Kinsella says that it is not scarce because it is not rivalrous. Kinsella says that a rivalrous good is one that can only be exclusively controlled by one person at a time. Wenzel asks why that is the definition and claims that there is rivalry between him and someone selling the same formula as him (and driving the price down).
Here are the problems...
1. Wenzel's idea is not scarce... the better the idea, the more people have it at the same time
500 BC - Mo Ti, Buddha, Socrates all working on the same ideas and largely same results.
1700 - Isaac Newton and Leibnitz
1850 Darwin and Wallace (and Mendel, who actually analyzed the data correctly as science.)
2000 Google and Baidu.
2. When Wenzel’s idea is put out in public, 7.999 million times of 8 it will fail. Great in the head, unworkable in real life. Even if he fails, Wenzel has IPR which is enforced by state violence. Anyone who would make Wenzel’s idea better is stopped from doing so, (or at least without Wenzel’s permission which means money to Wenzel). Are we not yet done with systems that pay people for nonperformance?
3. Competition is not rivalry. Competition is to strive with. In comedy and fashion and religion and the arts where copying is allowed, creativity explodes. Because the code for the internet was public domain, we had the explosion of benefit.
4. What every pro-IPR advocate forgets is the benefit of competition. Competition makes each iteration better, and he who listens to customers best wins. With IPR there is zero need to listen to customers.
5. IPR advocates ignore the work necessary to gain a customer. Ideas are cheap and plentiful. The work necessary to create the product, line up production, set up the marketing channel, devise the logistics, get customers and set up a payment mechanism, there is the real work. I think one reason some people are so pro-IPR is they understand this, and desire to harness the poor schmucks who actually perform with a private tax enforced by public-paid violence.
6. IPR denies a customer a choice when there is no scarcity to limit choice. With real estate, if I want a room with that ocean view, I very well may have no choice but to check into that hotel. With Wenzel’s Better Drudge-a-rthm, once known, there is no reason I should not be free to buy Kinsella’s Bestest Drudge-a-rthm.
25) Wenzel asks Kinsella to demonstrate to him how he uses his Drudge formula. Kinsella asks Wenzel if he can tell him what’s in his left pocket. Wenzel says that he can’t and that’s the exact point. Wenzel says that knowledge is scarce.
The putatively scarce idea is useless “in his pocket.” It can only be useful when it is revealed. But Wenzel believes once revealed, his idea loses its value if not monopolized by Wenzel by means of state-backed violence. What else in commerce is valuable as long as nobody knows about it, but worthless if the market becomes aware of it? (Well, nothing, not even a trade secret.) Working backward from the IPR rationale to the problem it solves, we find the putative problem risible.
Once an idea is revealed it becomes valuable by improvements the more people that use it and work with it. It is those who use it and work with it that make it valuable. Why should society lay a restraining obligation on those who produce value through action, and obligate the productive to share their profits with one (of no doubt many) who merely thought up an idea and then did nothing about it, or is incapable of actualizing a benefit to society with the idea?
The idea that there is no innovation without IPR is debunked by the very IPR laws: "so many people are so willing to work on sheer speculation in order to serve the market we need laws to keep people from innovating, or we will have people innovating."
Once an idea is revealed it becomes valuable by improvements the more people that use it and work with it. It is those who use it and work with it that make it valuable. Why should society lay a restraining obligation on those who produce value through action, and obligate the productive to share their profits with one (of no doubt many) who merely thought up an idea and then did nothing about it, or is incapable of actualizing a benefit to society with the idea?
The idea that there is no innovation without IPR is debunked by the very IPR laws: "so many people are so willing to work on sheer speculation in order to serve the market we need laws to keep people from innovating, or we will have people innovating."
If Wenzel wants to make money with his idea, then he can implement his plan. Others implementing their plans take nothing from Wenzel, since ultimately the customer decides who the customer will patronize, and customers ought not be denied choice, especially denied by threat of violence.
On the other hand, a piece of land is property. It is not hidden. It is scarce, since that is all there is of that property. Various people have various ideas of what to do with it. They will bid against each other, and he who has the best, highest use will pay the most.
No such scarcity exists with ideas. Everyone can use the same idea at once, everyone can tweak it anyway they like, and everyone can present it to the customer at once. Everyone has invested their own time talent and treasure in their iteration. Wenzel is out nothing in this scenario, and in fact, Wenzel benefits along with everyone else by the choices and price reductions that result.
Even if someone charges less than Wenzel for the same thing Wenzel sells - an event that has never occurred in the history of mankind - (If so, cite a single example in the history of mankind) Wenzel benefits from the option of the alternative offer, if nothing else than to discover the alternative market that the alternative offer has highlighted. Merchants benefit from competitors in this way very often.
32) Kinsella says that Wenzel’s theory seems to be that if he can sell something for a price, then he should have some sort of anti-competitive right to keep the price high, which makes it scarce in a sense, so it can be owned. Wenzel says that if something has a price, it is scarce.
It is not the idea that is scarce. What is scarce is Wenzel’s time, talent and treasure and effort to capitalize on the idea. The only right in natural law is Wenzel’s income from Wenzel’s work with the idea.
IBM, the #1 patent holder in USA has figured this out. They are open sourcing their patents, because there is no value in owning a patent. The real value is in IBM’s consulting on how to use the ideas it “owns.” It is weird that IPR results in a paradox: the best thing to do if you own IPR is to open source it.
What is also odd is Wenzel says his secret idea is valuable. To get IPR you must necessarily make it public, at which point it is no longer secret. So he demands rights based on an internal contradiction.
Is he conflating trade secrets and “intellectual property,” which is a tactic, not a property?
See the game business Valve for open sourced everything, and very blurred lines between employees, customers, etc.
Kinsella asks Wenzel to agree that while multiple people couldn’t use the exact same scarce physical means to make a cake or a bloody mary, multiple people could use the same knowledge at the same time. Wenzel agrees, but says that not everyone is going to know the information, so the information is scarce.
But the moment the idea is out, it is not longer scarce, it is infinitely available and duplicable, like Thos. Jefferson’s idea that when one lights a candle from another candle, the original candle has lost nothing. Certainly one can argue that the owner of the original lit candle has a property right in the fire, and everyone should pay him for any light there might be. But that is not an argument for IPR, since no IPR law protects fire, and fire is a natural phenomenon, like rain.
But the analogy does works in the negative: IPR advocates are like the person with the lit candle who demands everyone else pay him for light. Anyone who refuses to pay the individual who "owns" the light should be punished by the community for failure to pay.
IPR advocates want us to be kept in the dark, unless we pay them a private tax for the use of our candles.
Feel free to forward this by email to three of your friends.But the analogy does works in the negative: IPR advocates are like the person with the lit candle who demands everyone else pay him for light. Anyone who refuses to pay the individual who "owns" the light should be punished by the community for failure to pay.
IPR advocates want us to be kept in the dark, unless we pay them a private tax for the use of our candles.
***John Spiers will be offering an all-day seminar on small business international trade start up at Orange Coast College, Los Angeles Area, June 29, 2013. Full info here...***
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