Intellectual Monopoly?

by on April 27, 2006 · 24 comments

The first panel of yesterday’s Cato conference focused on Against Intellectual Monopoly, a treatise against patent and copyright law. One of the authors, David LeVine, faced off against James DeLong of the Progress and Freedom Foundation, with Cato’s Jim Harper providing some theoretical background at the outset.

I wanted to be convinced by Mr. LeVine’s argument. The world would be a much simpler place if we could just forget about all this intellectual property stuff. IP litigation consumes a lot of resources and the IP system is prone to rent-seeking legislation like the DMCA. Unfortunately, he just didn’t make a very convincing case. He did point out certain classes of content that could be produced for free; open source software is an obvious example. But it’s hardly groundbreaking to point out that some creative works could be produced without the IP system. The central question is whether, on the margin, intellectual property increases or decreases incentives for the production of creative works.

I just didn’t think LeVine did a very good job of engaging on this question. As DeLong pointed out, there are some classes of creative works, such as big-budget Hollywood movies and pharmaceuticals, which it seems exceedingly unlikely would be produced without an intellectual property system. When asked about the King Kong example, LeVine seemed to me to dodge the question, giving examples that really aren’t analogous.

Moreover, LeVine seemed not to grasp the point that copyright and copyleft products can perfectly well co-exist side-by-side. Bad legislation like the DMCA aside, there’s no reason a well-designed copyright system should in any way impede the creation and distribution of non-commercial creative works. True, I can’t take the source code to Microsoft Windows as the basis for my next open source operating system, but in an non-IP world Microsoft Windows likely wouldn’t exist, so that doesn’t seem like a great loss.

If non-commercial, decentralized production methods really are superior, they should be able to prove their worth without changes to the copyright system. So I’m perfectly willing to take a wait-and-see attitude. If, 20 years from now, we’re all running Linux, going to movies produced by volunteers in their free time, and taking drugs produced at low cost by Universities, then we can by all means abolish intellectual property then. But right now, intellectual property seems to be doing a pretty good job of stimulating the production of creative works, and I’m not inclined to upset the apple cart without a good reason.

  • http://www.analoghole.com analoghole

    I didn’t get to the conference, so I can’t respond specifically to what LeVine said, but as to the question you present — “whether, on the margin, intellectual property increases or decreases incentives for the production of creative works” — there certainly are many points that *could* be raised that intellectual property decreases, or at least does not increase, the production of creative works at the margin. The Sonny Bono Copyright Extension Act is a good example of the expansion of IP in recent years (i.e., at the margin) that has not demonstrably increased creative works, but has impeded their production. I’m not sure it is an answer to the question you pose to suggest, as DeLong does, that there are some classes of works like big-name pharmaceiuticals or big-budget Hollywood movies, that would not be made in the complete absence of intellectual property laws. If the debate is about whether IP law, at the margins, results in more production of these classes works, then the question is really whether as much of works would have been produced, or would continue to be produced, if IP law weren’t as strong as it is now. (And the answer is that it’s difficult to tell, but there are certainly many indications that such things would still be produced even if, say, copyright terms were only 20 years, or patent laws were less protective of pharmaceuticals). Even if the debate really was about whether it would be better to have no IP protection at all (and very few people actually subscribe to such an absolutist position), then it’s not enough to say that fewer works of a particular type would be produced, or that a certain work (MS Windows, or Gigli, or whatever) would not have been produced in its current form. One also has to ask whether the alternative would have resulted in the production of more works than the current system, and whether the current system has prevented the creation of works that would have been created in the alternative universe. And that’s not even getting into the issue of the comparative quality of the works produced in each of the two universes.

    I don’t think these questions are easily answered. But if you’re having a debate about whether IP is, on balance, a good thing or notm they afre the kind of questions that have to be asked.

  • http://www.analoghole.com analoghole

    I didn’t get to the conference, so I can’t respond specifically to what LeVine said, but as to the question you present — “whether, on the margin, intellectual property increases or decreases incentives for the production of creative works” — there certainly are many points that *could* be raised that intellectual property decreases, or at least does not increase, the production of creative works at the margin. The Sonny Bono Copyright Extension Act is a good example of the expansion of IP in recent years (i.e., at the margin) that has not demonstrably increased creative works, but has impeded their production. I’m not sure it is an answer to the question you pose to suggest, as DeLong does, that there are some classes of works like big-name pharmaceiuticals or big-budget Hollywood movies, that would not be made in the complete absence of intellectual property laws. If the debate is about whether IP law, at the margins, results in more production of these classes works, then the question is really whether as much of works would have been produced, or would continue to be produced, if IP law weren’t as strong as it is now. (And the answer is that it’s difficult to tell, but there are certainly many indications that such things would still be produced even if, say, copyright terms were only 20 years, or patent laws were less protective of pharmaceuticals). Even if the debate really was about whether it would be better to have no IP protection at all (and very few people actually subscribe to such an absolutist position), then it’s not enough to say that fewer works of a particular type would be produced, or that a certain work (MS Windows, or Gigli, or whatever) would not have been produced in its current form. One also has to ask whether the alternative would have resulted in the production of more works than the current system, and whether the current system has prevented the creation of works that would have been created in the alternative universe. And that’s not even getting into the issue of the comparative quality of the works produced in each of the two universes.

    I don’t think these questions are easily answered. But if you’re having a debate about whether IP is, on balance, a good thing or notm they afre the kind of questions that have to be asked.

  • http://www.techliberation.com/ Tim

    I agree that particular aspects of the copyright system impede the creation of creative works at the margin, and that some of these should be reformed (with Bono and the DMCA being the two best examples). Levine, however, is making the case for abolishing intellectual property entirely. I think that’s clearly a bad idea.

  • http://www.techliberation.com/ Tim

    I agree that particular aspects of the copyright system impede the creation of creative works at the margin, and that some of these should be reformed (with Bono and the DMCA being the two best examples). Levine, however, is making the case for abolishing intellectual property entirely. I think that’s clearly a bad idea.

  • http://www.techdirt.com/ Mike Masnick

    Hey Tim,

    On the question of big budget items, you should look at some more of Levine’s work. He has an entire chapter in his book focusing on the pharmaceutical industry, comparing differences across nations, and finding that patent protection for pharma is not indicative of a stronger or better pharma industry.

    Also, as for Jim DeLong’s question… I still think most of the answers that he claims aren’t answers actually *were* decent answers (though, admittedly, some of them were from me, even if he misquoted me).

    However, the real issue was the problem of the question: “How do we keep producing $200 million movies?” has an assumption that that’s the way things need to be. Once again, it’s about protecting one particular industry (the blockbuster movie business) rather than focusing on the real question of “Can we still create entertainment vehicles people want?” Why focus only on the $200 million blockbuster?

    Hell, I’m sure the buggy whip makers a century ago were asking “with the automobile market coming along, won’t someone tell us how to keep creating buggy whips?”

    The problem with the point that DeLong and others from PFF were taking was they seemed to take absolute points: there is no business model without stronger protection. Then, when any of us pointed out that there were business models, completely disproving their absolute position, they would say that it doesn’t count because on its own, it doesn’t match up with the size of the old business model. But they’re looking at it very narrowly. How can NBC Universal get $200 million back to pay off the $200 million blockbuster? Perhaps they should be focusing on making more smaller cost films that can recoup that lower amount instead… Sure, maybe it’s more difficult to recoup the full $200 million, but that doesn’t mean the entertainment industry dies, it just means it changes.

    Market economics at work… If people get upset that there aren’t $200 million blockbusters any more, I’d bet that someone more creative will come along and figure out the business models to make it work.

    The difference between DeLong and myself is that, despite him suggesting I have some sort of “copyleft” viewpoints, I actually seem to trust the free market to come up with the business models, and he assumes the gov’t needs to come in and enforce the only business model he can see. I’m not quite sure how that makes me a “leftist.”

  • http://www.techdirt.com/ Mike Masnick

    Hey Tim,

    On the question of big budget items, you should look at some more of Levine’s work. He has an entire chapter in his book focusing on the pharmaceutical industry, comparing differences across nations, and finding that patent protection for pharma is not indicative of a stronger or better pharma industry.

    Also, as for Jim DeLong’s question… I still think most of the answers that he claims aren’t answers actually *were* decent answers (though, admittedly, some of them were from me, even if he misquoted me).

    However, the real issue was the problem of the question: “How do we keep producing $200 million movies?” has an assumption that that’s the way things need to be. Once again, it’s about protecting one particular industry (the blockbuster movie business) rather than focusing on the real question of “Can we still create entertainment vehicles people want?” Why focus only on the $200 million blockbuster?

    Hell, I’m sure the buggy whip makers a century ago were asking “with the automobile market coming along, won’t someone tell us how to keep creating buggy whips?”

    The problem with the point that DeLong and others from PFF were taking was they seemed to take absolute points: there is no business model without stronger protection. Then, when any of us pointed out that there were business models, completely disproving their absolute position, they would say that it doesn’t count because on its own, it doesn’t match up with the size of the old business model. But they’re looking at it very narrowly. How can NBC Universal get $200 million back to pay off the $200 million blockbuster? Perhaps they should be focusing on making more smaller cost films that can recoup that lower amount instead… Sure, maybe it’s more difficult to recoup the full $200 million, but that doesn’t mean the entertainment industry dies, it just means it changes.

    Market economics at work… If people get upset that there aren’t $200 million blockbusters any more, I’d bet that someone more creative will come along and figure out the business models to make it work.

    The difference between DeLong and myself is that, despite him suggesting I have some sort of “copyleft” viewpoints, I actually seem to trust the free market to come up with the business models, and he assumes the gov’t needs to come in and enforce the only business model he can see. I’m not quite sure how that makes me a “leftist.”

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

    Levine’s book is a must-read. Though he uses anecdotes, he uses good anecdotes to illustrate his thesis that intellectual monopoly (the right to control IP post-sale) reduces competition, production, and innovation. He finds a variety of natural experiments to show that when IP rights are added, people focus more on profiting from past work and less on the next increment of creativity.

    As Mike notes, the “what happens to big-budget movies” question is the wrong question. It uses the wrong definition of the market. The relevant market is for entertainment and leisure, not for big-budget movies. Policy should only care whether people are entertained, not whether they are entertained a certain way or by a certain industry.

  • http://gondwanaland.com/mlog/ Mike Linksvayer

    The central question is whether, on the margin, intellectual property increases or decreases incentives for the production of creative works.

    Replace ‘incentives for the production of creative works’ with ‘utility’ or similar and I might agree, for the former ignores production costs and enforcement costs (apart from those that directly impact more production).

    I like Jim Harper’s phrasing:

    The relevant market is for entertainment and leisure, not for big-budget movies. Policy should only care whether people are entertained, not whether they are entertained a certain way or by a certain industry.

    However it too ignores costs.

    If non-commercial, decentralized production methods really are superior, they should be able to prove their worth without changes to the copyright system. So I’m perfectly willing to take a wait-and-see attitude.

    This is an interesting challenge for abolitionists. I would love to see an imaginative response. (One overconfident response would be “Yes, production that doesn’t rely on state enforcement will inevitably win.”) But unfortunately abolition of IP isn’t on the table any more than abolition of the state is, though people can theorize about both. Reversing copyright extension, the DMCA, etc. and preventing more of the same requires no wait-and-see — to the contrary, immediate and ongoing action are required.

    There’s another misconception in the quote above — production that doesn’t rely on state enforcement isn’t necessarily non-commercial.

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

    Levine’s book is a must-read. Though he uses anecdotes, he uses good anecdotes to illustrate his thesis that intellectual monopoly (the right to control IP post-sale) reduces competition, production, and innovation. He finds a variety of natural experiments to show that when IP rights are added, people focus more on profiting from past work and less on the next increment of creativity.

    As Mike notes, the “what happens to big-budget movies” question is the wrong question. It uses the wrong definition of the market. The relevant market is for entertainment and leisure, not for big-budget movies. Policy should only care whether people are entertained, not whether they are entertained a certain way or by a certain industry.

  • http://gondwanaland.com/mlog/ Mike Linksvayer

    The central question is whether, on the margin, intellectual property increases or decreases incentives for the production of creative works.

    Replace ‘incentives for the production of creative works’ with ‘utility’ or similar and I might agree, for the former ignores production costs and enforcement costs (apart from those that directly impact more production).

    I like Jim Harper’s phrasing:

    The relevant market is for entertainment and leisure, not for big-budget movies. Policy should only care whether people are entertained, not whether they are entertained a certain way or by a certain industry.

    However it too ignores costs.

    If non-commercial, decentralized production methods really are superior, they should be able to prove their worth without changes to the copyright system. So I’m perfectly willing to take a wait-and-see attitude.

    This is an interesting challenge for abolitionists. I would love to see an imaginative response. (One overconfident response would be “Yes, production that doesn’t rely on state enforcement will inevitably win.”) But unfortunately abolition of IP isn’t on the table any more than abolition of the state is, though people can theorize about both. Reversing copyright extension, the DMCA, etc. and preventing more of the same requires no wait-and-see — to the contrary, immediate and ongoing action are required.

    There’s another misconception in the quote above — production that doesn’t rely on state enforcement isn’t necessarily non-commercial.

  • Bill Stepp

    I wasn’t at the conference, so I can’t comment on what David said, but I will say that the critique of pharmaceutical patents he co-wrote with Michele Boldrin in their forthcoming book _Against Intellectual Monopoly_ is devastating to the pro-patent position.
    I summarize it and add some stuff in a forthcoming article in The Freeman, a libertarian monthly.

    What’s the King Kong example about?

  • http://www.techliberation.com/ Tim

    The King Kong example is just the question of whether we could have big-budget movies without copyright.

  • Bill Stepp

    I wasn’t at the conference, so I can’t comment on what David said, but I will say that the critique of pharmaceutical patents he co-wrote with Michele Boldrin in their forthcoming book _Against Intellectual Monopoly_ is devastating to the pro-patent position.
    I summarize it and add some stuff in a forthcoming article in The Freeman, a libertarian monthly.

    What’s the King Kong example about?

  • http://www.techliberation.com/ Tim

    The King Kong example is just the question of whether we could have big-budget movies without copyright.

  • http://gondwanaland.com/mlog/ Mike Linksvayer

    Not a direct answer, but we can still have big movies without big budgets — they will just take a very long time to make, waiting for the right free resources to be offered to the producers and the right technology to get cheap enough. The best example of this method is Star Wreck: In the Pirkinning. There’s a good presentation by the creator on the future of such productions here.

  • http://gondwanaland.com/mlog/ Mike Linksvayer

    Not a direct answer, but we can still have big movies without big budgets — they will just take a very long time to make, waiting for the right free resources to be offered to the producers and the right technology to get cheap enough. The best example of this method is Star Wreck: In the Pirkinning. There’s a good presentation by the creator on the future of such productions here.

  • T.T.

    Has King Kong even made back its $200 million yet (http://www.hollywoodlot.com/hl.php/1/246/)?

    And if King Kong only ends up making $150 million, does that mean that we don’t have enough IP protectionism? That we need to extend patent rights to the film industry, so that any future giant-monkey films/stories/books/cartoons have to pay licensing back to the studio?

    Or could it just be that the market doesn’t value King Kong at $200 million?

    DeLong’s position seems to be that the government should step in and ensure that the movie studio can recoup its cost, no matter how silly the storyline or characters, no matter how ridiculous the chase scenes, no matter how many dinosaurs and giant bugs per minute, no matter how astronomical the budget.

    That’s a silly position, and DeLong should be ashamed for trying to foist it on us.

  • T.T.

    I suppose if I mention the words “Water World,” my above argument might become more salient.

    My point is this: the free market should be in charge of determining value, not monopoly powers handed out by the government.

    Now, we can all stand a little arbitrary monopoly, but when it extends in time to terms as long as a century, and when it unjustly prevents competition, and when it hampers consumers ability to enjoy products that they pay for, and when it discourages new players from trying to make competing products, it becomes much more than a little arbitrary monopoly — it becomes fascism.

  • T.T.

    Has King Kong even made back its $200 million yet (http://www.hollywoodlot.com/hl.php/1/246/)?

    And if King Kong only ends up making $150 million, does that mean that we don’t have enough IP protectionism? That we need to extend patent rights to the film industry, so that any future giant-monkey films/stories/books/cartoons have to pay licensing back to the studio?

    Or could it just be that the market doesn’t value King Kong at $200 million?

    DeLong’s position seems to be that the government should step in and ensure that the movie studio can recoup its cost, no matter how silly the storyline or characters, no matter how ridiculous the chase scenes, no matter how many dinosaurs and giant bugs per minute, no matter how astronomical the budget.

    That’s a silly position, and DeLong should be ashamed for trying to foist it on us.

  • T.T.

    I suppose if I mention the words “Water World,” my above argument might become more salient.

    My point is this: the free market should be in charge of determining value, not monopoly powers handed out by the government.

    Now, we can all stand a little arbitrary monopoly, but when it extends in time to terms as long as a century, and when it unjustly prevents competition, and when it hampers consumers ability to enjoy products that they pay for, and when it discourages new players from trying to make competing products, it becomes much more than a little arbitrary monopoly — it becomes fascism.

  • Tony Lekas

    It appears that, with a worldwide gross of $547,256,075 so far, King Kong probably made money. I am not sure because I don’t know how that gross is distributed between theaters, the studio, etc.

    Waterworld is a good example of a failure in the market.

    I am not opposed to “reasonable” IP protection. However the area has the usual problem of those with large interests in the issue pushing for overextending IP protection and those with diffuse interests not paying attention.

  • Tony Lekas

    It appears that, with a worldwide gross of $547,256,075 so far, King Kong probably made money. I am not sure because I don’t know how that gross is distributed between theaters, the studio, etc.

    Waterworld is a good example of a failure in the market.

    I am not opposed to “reasonable” IP protection. However the area has the usual problem of those with large interests in the issue pushing for overextending IP protection and those with diffuse interests not paying attention.

  • Lawrence Kogan

    To all of you anti-IP ideologues,

    It is quite enlightening to read comments from pure ideologues unfamiliar with what it takes to organize, operate and fund a business.

    What you all do not understand about business, law, economics, and finance could fill much more than the national archives.

    If you had any practical sense of what economic assets were, and about the different types of property identified both in law, and in equity, you might begin to understand the significance of intellectual property.

    However, since you all cannot see beyond your myopic anarchic ideology of pure laissez faire capitalism which exists only in treatises, I do not hold out such hope.

    I had the unrewarding experience of meeting and speaking with Mr. Harper at a recent function in Washington these past few weeks. I found him less than engaging from an intellectual perspective.

    Sincerely,

    Lawrence A. Kogan, Esq.
    CEO
    Institute for Trade, Standards and Sustainable Development, Inc.

  • Lawrence Kogan

    To all of you anti-IP ideologues,

    It is quite enlightening to read comments from pure ideologues unfamiliar with what it takes to organize, operate and fund a business.

    What you all do not understand about business, law, economics, and finance could fill much more than the national archives.

    If you had any practical sense of what economic assets were, and about the different types of property identified both in law, and in equity, you might begin to understand the significance of intellectual property.

    However, since you all cannot see beyond your myopic anarchic ideology of pure laissez faire capitalism which exists only in treatises, I do not hold out such hope.

    I had the unrewarding experience of meeting and speaking with Mr. Harper at a recent function in Washington these past few weeks. I found him less than engaging from an intellectual perspective.

    Sincerely,

    Lawrence A. Kogan, Esq.
    CEO
    Institute for Trade, Standards and Sustainable Development, Inc.

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