Loading More into the Shopping Cart

by on February 28, 2006 · 8 comments

Jim DeLong has responded to comments on his shopping cart analogy – the idea that copying intellectual property is like taking a shopping cart – by pointing out that the marginal cost of producing a shopping cart is very low, just like the marginal cost of producing intellectual goods. His conclusion: the distinction between physical goods and intellectual goods is “one of degree, and often a slight one.”

Jim has not identified who has missed his point, and IPCentral doesn’t publish comments, so I’m going to assume that he’s responding to the posts and comments here on TLF.

The distinction I made between intellectual and physical goods in my long and windy post comes at a more basic level. I explored why property rights originate in the first place. In tangible goods, property rights exist to prevent conflict in the context of scarcity. In intellectual goods, property rights exist to prevent conflict in the context of abundance.

And we should be entirely clear that intellectual goods are abundant. Your computer has copied this post so that you could read it. Doing so has rendered no one less able to do so. Loading it from servers I theoretically pay for cost me a wee bit, but if you were to cut and paste this text, you could reproduce it at zero cost to its original producer/owner. Try doing that with a shopping cart! There is a difference between “tending toward zero” and “zero” – a difference of kind, not degree.

It could be that Jim D. is wedding intellectual and tangible property through a new theory: property rights arise as a natural consequence of things being produced from other things at marginal cost. This mixes the roots of property rights in natural justice with the economics of production, and I think it’s unworkable, but if that’s a theory he wants to defend . . . .

More likely, Jim is appealing to the unfairness of expensive pieces of intellectual property being stolen. I agree that violating copyrights is wrong, but I’m not sure that the marginal theory of value applies well in the intellectual property environment. Indeed, the copyright/patent clause in the constitution seems to call mostly for application of the labor theory of value. We should reward creators in amounts that promote the progress of science and useful arts.

Finding the level of reward that does this is difficult, but abandoning the task and adopting the marginal theory of value would probably reduce welfare compared to a regime that judiciously rewards creativity. It is my opinion that allowing the “Rambo” franchise to transfer more than a billion dollars from consumers to producers was wrong when consumers could have gotten the same value, and possibly much more, at half the price.

  • Ted G.

    Once again, Jim, a very well written response.

    The only problem is that DeLong’s Shopping Cart posts at IPCentral don’t deserve the ink, nor the traffic you are sending his way. Seriously, I’m beginning to wonder if DeLong isn’t a closet information anarchists and is putting up extremely weak strawmen just to prove how easy it is to swat them down and to demonstrate how fallible the “created works are equivalent to tangible property” stance really is.

    BTW, they don’t have a comment area over there at IPCentral exactly because they want other blogs to link to them instead of responding directly.

  • Ted G.

    Once again, Jim, a very well written response.

    The only problem is that DeLong’s Shopping Cart posts at IPCentral don’t deserve the ink, nor the traffic you are sending his way. Seriously, I’m beginning to wonder if DeLong isn’t a closet information anarchists and is putting up extremely weak strawmen just to prove how easy it is to swat them down and to demonstrate how fallible the “created works are equivalent to tangible property” stance really is.

    BTW, they don’t have a comment area over there at IPCentral exactly because they want other blogs to link to them instead of responding directly.

  • http://digital-copyright.ca/petition Chris Brand

    While I appreciate arguments about marginal cost and the like, my biggest problem with any argument comparing intellectual property with physical property is that the two conflict. Every right granted to an owner of intellectual property is one less right granted to the owner of physical copies of that intellectual property.

    If I own a music CD and the government decides to grant the music copyright holder a propping-up-the-table right, the value of my physical property has decreased because I can no longer use it to prop up the table without first buying a license.

    Every single intellectual property right has this effect of decreasing the value of physical property. That’s the main reason I think we need to be very careful to grant the correct amount of rights to owners of intellectual property.

  • http://digital-copyright.ca/petition Chris Brand

    While I appreciate arguments about marginal cost and the like, my biggest problem with any argument comparing intellectual property with physical property is that the two conflict. Every right granted to an owner of intellectual property is one less right granted to the owner of physical copies of that intellectual property.

    If I own a music CD and the government decides to grant the music copyright holder a propping-up-the-table right, the value of my physical property has decreased because I can no longer use it to prop up the table without first buying a license.

    Every single intellectual property right has this effect of decreasing the value of physical property. That’s the main reason I think we need to be very careful to grant the correct amount of rights to owners of intellectual property.

  • http://techliberation.com/ SolveigS

    I do think it is important to recollect that the “abundance” of IP only arises *after* it has been created. I’m not aware of anything better than just plain old market pricing for determining “how much” is necessary to encourage production. If Rambo creators charge too much for Rambo, it is an invitation to a competitor to come in and charge less. And, I do think that the difference between zero marginal cost and almost zero is… more difficult than you think. Shopping carts are one thing, indeed, but pharmaceuticals are another . . . (and for the record Jim D’s shopping cart post was not intended to be taken quite so seriously as it has been).

    Re comments: IPcentralits prefer to respond to other blogs because they tend to be more substantive than comments, and less given to name-calling. We also accept comments by email, and with permission repost thoughtful ones on IPcentral.

    The conflict between physical rights and IP has been often noted, but is, I think, overly simplistic. Contract rights and physical rights also conflict. So do easements. There are benefits in keeping physical rights absolutely simple and pure; but in a world where capital and value is increasingly intellectual in nature, there are also benefits in setting out some ground rules regarding trades, etc.

    It is very difficult to make an interesting case either for or against IP if one *assumes* that physical property is absolute. Assume Principle A is inviolable. Principle B conflicts. Principle B must be bad. There is no substance here! If, on the other hand, one starts with an actual *argument* about why physical property is important (as Richard Epstein has done), then it gets interesting and much more difficult. The two are not identical, but they are sufficiently similar to merit some head-scratching.

  • Solveig Singleton

    I do think it is important to recollect that the “abundance” of IP only arises *after* it has been created. I’m not aware of anything better than just plain old market pricing for determining “how much” is necessary to encourage production. If Rambo creators charge too much for Rambo, it is an invitation to a competitor to come in and charge less. And, I do think that the difference between zero marginal cost and almost zero is… more difficult than you think. Shopping carts are one thing, indeed, but pharmaceuticals are another . . . (and for the record Jim D’s shopping cart post was not intended to be taken quite so seriously as it has been).

    Re comments: IPcentralits prefer to respond to other blogs because they tend to be more substantive than comments, and less given to name-calling. We also accept comments by email, and with permission repost thoughtful ones on IPcentral.

    The conflict between physical rights and IP has been often noted, but is, I think, overly simplistic. Contract rights and physical rights also conflict. So do easements. There are benefits in keeping physical rights absolutely simple and pure; but in a world where capital and value is increasingly intellectual in nature, there are also benefits in setting out some ground rules regarding trades, etc.

    It is very difficult to make an interesting case either for or against IP if one *assumes* that physical property is absolute. Assume Principle A is inviolable. Principle B conflicts. Principle B must be bad. There is no substance here! If, on the other hand, one starts with an actual *argument* about why physical property is important (as Richard Epstein has done), then it gets interesting and much more difficult. The two are not identical, but they are sufficiently similar to merit some head-scratching.

  • http://www.cato.org/people/harper.html Jim Harper

    Thank you, Solveig.

    I take it you grant that the reason for laws protecting creators’ rights in intellectual property is to get IP created in the first place.

    This was part of my point where I said that IP laws prevent conflict in the context of abundance. IP is so abundant that you can’t effectively fence it once it’s created. Your choices in the absence of statutory protection are a) not creating, b) not distributing, or c) spending all your days trying to enforce your rights. IP law fixes it so that intellectual goods are created, shared, and used.

    What, though, is the rationale for extending those rights beyond what gives people the incentive to create? (Greater reward seems implicit in your market pricing argument. Am I wrong?)

    Abundance becomes a feature rather than a bug once a creator has enjoyed recompense for the item created. At that point, everyone should be able to use and reuse the item of intellectual property, speeding the – well, “progress of science and useful arts.”

    Your defense of market pricing begs the key question, which is what the creator’s rights are in the first place – what the creator can bring to the market and for how long. If you extend IP rights infinitely and very broadly, the market pays very well. If you limit them sharply the market doesn’t pay well at all.

    The “limited times” restriction in the Constitution seems clearly to suggest that there is a balance to be struck by public policy, not a marketplace measure. Public policy should be informed by economic study rather than rent-seeking, which I suspect underlies most recent extensions and expansions of intellectual property rights.

    If the Framers had intended the subjective or marginal theories of value to determine what creators should be paid, they wouldn’t have included the “limited times” language. Indeed, there wouldn’t have been a copyright/patent clause. IP would have been assumed one of the natural property rights protected in the 5th and (later) 14th Amendments.

  • http://www.cato.org/people/harper.html Jim Harper

    Thank you, Solveig.

    I take it you grant that the reason for laws protecting creators’ rights in intellectual property is to get IP created in the first place.

    This was part of my point where I said that IP laws prevent conflict in the context of abundance. IP is so abundant that you can’t effectively fence it once it’s created. Your choices in the absence of statutory protection are a) not creating, b) not distributing, or c) spending all your days trying to enforce your rights. IP law fixes it so that intellectual goods are created, shared, and used.

    What, though, is the rationale for extending those rights beyond what gives people the incentive to create? (Greater reward seems implicit in your market pricing argument. Am I wrong?)

    Abundance becomes a feature rather than a bug once a creator has enjoyed recompense for the item created. At that point, everyone should be able to use and reuse the item of intellectual property, speeding the – well, “progress of science and useful arts.”

    Your defense of market pricing begs the key question, which is what the creator’s rights are in the first place – what the creator can bring to the market and for how long. If you extend IP rights infinitely and very broadly, the market pays very well. If you limit them sharply the market doesn’t pay well at all.

    The “limited times” restriction in the Constitution seems clearly to suggest that there is a balance to be struck by public policy, not a marketplace measure. Public policy should be informed by economic study rather than rent-seeking, which I suspect underlies most recent extensions and expansions of intellectual property rights.

    If the Framers had intended the subjective or marginal theories of value to determine what creators should be paid, they wouldn’t have included the “limited times” language. Indeed, there wouldn’t have been a copyright/patent clause. IP would have been assumed one of the natural property rights protected in the 5th and (later) 14th Amendments.

Previous post:

Next post: