If Resources Aren't Scarce, Why Do You Need A Market?
from the just-wondering dept
It's interesting to see folks who believe in free market economics struggle around the issue of intellectual property rights. You have those who recognize that economics still works without scarcity, and then you have those who insist the market breaks down when things are free and abundant. That latter camp tends to come at the debate from a "property rights" focus, rather than a real economics focus -- and therefore miss some important points. Many of the people who work for the Progress and Freedom Foundation seem to fall into this camp. Take, for example, this odd defense of intellectual property rights by PFF's Solveig Singleton. It attempts to brush aside the claims that many of us make against today's intellectual property system. The key point that we've made is that innovation is an ongoing process of improvement upon improvement upon improvement. Locking up any of those steps and giving the idea associated with it a price actually slows down innovation (often by a great deal) by delaying that ongoing process and adding needless friction to it.Singleton admits that it's true that innovation is often about building on the works of others, but then tries to convince us that intellectual property protections fit fine with this, because it helps reward everyone in the chain. Basically, once you get rid of all the fluff about how copyright isn't really that bad, what she's saying is that copyright is good because it creates a market which helps people get paid. This is a compelling argument, and it's one that's been used before -- but it makes no sense once you think it through. The whole point of efficient markets is that they help figure out the best allocation of scarce resources. When the resources aren't scarce, you don't need them to be efficiently allocated. They're infinitely available and allocation no longer matters because everyone who wants it can have it. So imposing a market on infinite goods by introducing artificial scarcity isn't more efficient -- it's less efficient.
There's a simple example that should help make this clear. Air is an abundantly available resource. It's also quite valuable. By the view of those who think that any market is efficient, it should only make sense to give someone control over the air, and let them charge people to breathe. After all, think of what a huge boon to the economy it would be. Demand is extremely high and there's a tremendous market to be made in selling air. Yet, we think this is ridiculous. That's because air is abundant, and we don't need a market to efficiently allocate it. The same is true of ideas -- and coming up with a bogus restriction in the name of "markets" is just as silly as locking up the air and charging for it.
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Innovation is not scarce
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Silly as charging for water?
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Re: Silly as charging for water?
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It's not a welfare.
If you measure the outputs of the current patent system over the last few years, one can discern that the goal isn't in protecting the innovation and advancement of art, but to provide that welfare methodology you speak of.
The term "patent" originates from the Latin word patere which means "to lay open" (i.e., make available for public inspection).
I wonder how the inventor will benefit considering patents are extendable to 80-years after the inventor passes away. 80 years is an extremely long time for any development process. Any company that stalls and sagnates on an 80+ year-old idea probably needs to go away. I just can't see how this promotes any advancement except for a company's bottom lines. The legislators didn't think of long term ramifications when extending patent law.
To lock ideas up to one person/company for such an extended period of time really doesn't do much for advancement. It also doesn't help if the system is cost prohibitive to individuals. Lastly, the current system has no incentive to proactively market the ideas so they could be expanded and built upon. It's a real look-but-dont-touch mentality, that I believe this truly veers from the original intent of IP and 'patent' as a word in it's Latin origination.
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scarcity
When you are dealing with intellectual property you really need to distinguish between copyrights and patents.
In copyright, the producers of the content have the legal and moral right to establish the price they want to charge for it - they just don't have the right to try to impose their particular distribution model on every other producer of content. We may feel they are making the wrong decision but it is their content and their right (of course if they offer false testimony in support of attempts to shut down file downloading they and their lawyers should go to prison but that is a different issue)
Patent law is entirely different and there we appear to have rampant attempts to monopolize ideas which are natural and inevitable developments from the existing idea base and would have arisen without the encouragement of a patent system. Congress should outlaw "software" and business method patents as a small first step to reform.
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Idiots Aren't Scarce
Idiots aren't in short supply in this country indeed
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Re: Idiots Aren't Scarce
So many idiots posting here... it's really depressing
Idiots aren't in short supply in this country indeed
That's the way free markets and competition work, angry dude. You might want monopoly protection and to be the only idiot allowed to post here but you're just going to have to get over it and compete with the rest of them.
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Ideas are created by people
There's nothing like turning an argument on its head. I thought the fact that intellectual property can now be made into an infinite number of copies, which can be made available to anyone at virtually no cost, is precisely the problem. I imagine that the creator of such "ideas" might feel differently, seeing as how he or she no longer has any guarantee of benefitting from them.
What happens when the effort of creating "ideas," which are, of course, never just "ideas" but rather very specific formulations, is no longer rewarded? Will people still continue to work to create them? Or, will the most creative people simply move into some realm where their efforts cannot be infinitely copied without cost?
I remain amazed at the lengths some people will go to delude themselves into thinking it's okay to steal other people's property. Personally, I don't consider people to be so "abundant" as to make their efforts the same as the air we breath.
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Re: Ideas are created by people
OK, so you're amazed. But what does that have to do with anything being discussed here?
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Re: Ideas are created by people
No, actually, it's the opposite. Those who support patents are the ones who are saying that the laws of economics aren't necessary. They're the ones who say that the economics breaks down without a gov't subsidy. What I'm saying is you don't need gov't protectionism, and that you can build up innovation much faster by letting the laws of economics work without gov't interference.
There's nothing like turning an argument on its head. I thought the fact that intellectual property can now be made into an infinite number of copies, which can be made available to anyone at virtually no cost, is precisely the problem. I imagine that the creator of such "ideas" might feel differently, seeing as how he or she no longer has any guarantee of benefitting from them.
No one has any guarantee of benefiting from anything. You benefit from your ideas by doing something with that that serves a purpose in the market and getting rewarded that way. Just like anything else...
What happens when the effort of creating "ideas," which are, of course, never just "ideas" but rather very specific formulations, is no longer rewarded? Will people still continue to work to create them? Or, will the most creative people simply move into some realm where their efforts cannot be infinitely copied without cost?
You should look at the research on this. People continue to create ideas. But, rather than just focusing on the ideas, they focus on making them useful and practical and continually improving them.
And, just because an idea can be infinitely copied, doesn't mean that you can't make money on it. In fact, the opposite is true. You can often make more money from it:
See here for a more detailed explanation: http://www.techdirt.com/articles/20070503/012939.shtml
I remain amazed at the lengths some people will go to delude themselves into thinking it's okay to steal other people's property. Personally, I don't consider people to be so "abundant" as to make their efforts the same as the air we breath.
Well, there are two problems with your statement above. The first is that nothing is "stolen" and the second is that ideas aren't "property."
I defer to Thomas Jefferson's point on the topic:
"If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me."
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Re: Ideas are created by people
Just because something is no longer scarce does not mean the laws of supply and demand do not apply.
I imagine that the creator of such "ideas" might feel differently, seeing as how he or she no longer has any guarantee of benefitting from them.
Where is this guarantee that you speak of? Nothing in the Constitution or various IP laws guarantees an owner of IP a revenue stream. You are only guaranteed an opportunity.
What happens when the effort of creating "ideas," which are, of course, never just "ideas" but rather very specific formulations, is no longer rewarded?
It's the implementation of the idea, not the creating of the idea, that is rewarded. There are thousands upon thousands of patents sitting on some shelf at the USPTO gathering dust. Their value is zero. Just because you create something does not mean that it has any value and does not mean that are guaranteed a continuous revenue stream.
I remain amazed at the lengths some people will go to delude themselves into thinking it's okay to steal other people's property
Except that Mike and Techdirt have never ever taken or advocated that position. There are no delusions here. When something ceases to become scarce, it's time to change your business model. Period. Unfortunately, companies who have goods that are easily reproducible don't want to change their business model, they want to change the environment (DMCA, longer copyright, criminalize civil violations, etc) in which those goods are sold.
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Wrong. This is why I hate metaphors.
If all ideas were already out there and existed in an accessible form, then maybe I could see your point. What's the cure for AIDS? How do I make a nano-scale processor? Where are the answers to these questions? They'll be solved by researchers over time. Researchers and their time are the definition of a scarce resource. Ideas are a product of those scarce resources.
A market system for ideas rewards someone for paying said researchers and using their time to solve said problems.
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Re: Wrong. This is why I hate metaphors.
You're confusing two things: (1) ideas that haven't been created and (2) ideas that have. Ideas that have are now infinitely available. Ideas that haven't aren't, and certainly it helps to have some incentive to create new ones, but that's what the market is for. If there's demand, then there are incentives for new ideas that have nothing to do with locking up the ideas.
A market system for ideas rewards someone for paying said researchers and using their time to solve said problems.
It is one way of rewarding ideas, but it's not the most efficient at all. Please look at the research on this. The problem is that you're thinking of ideas as a single discovery. That's now how it works. Innovation is an ongoing process, and by locking up each part of it, you slow down the entire process. But if ideas are allowed to be free then innovation increases, and the REWARDS come from bringing things successfully to market.
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Ideas ARE property and more from Jefferson
BTW: The Jefferson-McPherson letter goes into great detail about Jefferson's views of patents and what's an innovation and what's not. I think the previous quotation given could use a little more context. As it is, it's a bit disingenuous to Jefferson's point of view. There's a reason why they have a bust of Jefferson at the USPTO.
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Re: Ideas ARE property and more from Jefferson
But the PURPOSE of property is for the sake of more efficiently allocating resources. The whole point is that with an idea, you don't need to allocate resources. It shouldn't be subject to property laws.
BTW: The Jefferson-McPherson letter goes into great detail about Jefferson's views of patents and what's an innovation and what's not. I think the previous quotation given could use a little more context. As it is, it's a bit disingenuous to Jefferson's point of view. There's a reason why they have a bust of Jefferson at the USPTO.
You think today's patent system reflects Jefferson's view of the patent system? I find that laughable. Yes, his bust is there because he helped create the patent system, but it was quite different in those days. He viewed it as a necessary evil to help put in place incentives. However, as research has repeatedly shown since then, those incentives may not be needed any more.
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Re: Ideas ARE property and more from Jefferson
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Re: Re: Ideas ARE property and more from Jefferson
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"Please look at the research on this."
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Re: "Please look at the research on this."
I've read it many times and I'd argue that, again, in the end his position is not so different than mine. He was worried about the tradeoffs between a patent system and how that locks up ideas, but agreed it was necessary incentives. However, as has become clear since then, those incentives very often aren't needed.
Jefferson seemed clear that there were dangers to having a patent system, and felt strongly that the patent system had to be careful not to go too far in one direction. If he saw the patent system today he'd probably weep. It reflects almost nothing of his view of the patent system.
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Without the answer, it is hard to say if your argument is really a problem or it is just something you read about every once in a while.
Also, most patents are valid for 20 years, I am not sure where some of the numbers in other posts here come from talking about 80 years.
Mike, to cut to the chase, why would Pfizer spend $500 million dollars on clinical trials on a patented drug if they didn't have patent protection? Sooner or later you would end up with only generic companies with no one doing research. You could say that drugs are not scarce, because once they are discovered, it costs very little to manufacture them, usually only pennies. Without the ability to charge more, why would anyone bother?
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Re:
I got the 80 year reference from changes to copyright law. Error on my part.
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Re:
That number is meaningless. It's just the fact that it adds friction to the overall process that matters.
Mike, to cut to the chase, why would Pfizer spend $500 million dollars on clinical trials on a patented drug if they didn't have patent protection? Sooner or later you would end up with only generic companies with no one doing research. You could say that drugs are not scarce, because once they are discovered, it costs very little to manufacture them, usually only pennies. Without the ability to charge more, why would anyone bother?
I've gone over this before, but that's simply not true. You can look at all the countries that haven't had pharmaceutical patents and yet still had thriving pharamceutical industries to prove that's false. If there's a good market, there's a way to make back the money in the market without artificial monopolies.
Also, you're asking the wrong question. It shouldn't be "how do we protect the pharmaceutical industry," but how do we help *health care* improve. Part of the problem is that the current patent regime is so focused on pharma that it discourages research and investment into non-pharma healthcare solutions.
As for what it encourages in the pharmaceutical world, it's not particularly promising. It simply encourages more patents -- which is why you end up with tons of me-too and lifestyle drugs.... followed up by more money being spent on advertising than is spent in drug development. In other words, we've created incentives for *easy monopolies in drugs* rather than *better healthcare*.
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Re:
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Efficiency is Overrated, Messy is Good
You run a huge risk moving from (good) recommendations for individual contrarian company moves to extrapolating those theories to the macro economic level. You keep pushing towards massively failed ideas like "efficient central planning".
I will pick on on this one idea of market efficiency that you are talking about to illustrate some of the dangers and paradoxes involved.
1. Our political system can be massively inefficient. Think about it, all those branches of government sitting around arguing and no laws getting passed.
2. In the late eighties the Japanese with their super efficient companies and consensus system was going to snow under the messy jalopy American system (read any business or newspapers from the time). Gee what happened?
3. We are sitting around right now arguing about the marketplace of ideas relating to intellectual property and copyright, you are somewhat right and also I am somewhat right and wrong. It is a terribly inefficient system that we fight all the time (inefficient but fun and I continue to learn and hold you in high regard)
4. Obviously short term planned efficient economies like the Soviets (and currently the Chinese) made very quick forward progress that petered out.
5. If one studies societies that can innovate over the long haul versus societies that have lost or never found their inventive zeal, there could be a correlation to strong property and strong intellectual property rights (amoung a whole host of other factors in the mix).
I am not arguing that the current system is efficient in the short term but the long term results have been spectacular (and of course I will grant you all the warts in our system too- unemployment, social problems, money jealousy, on and on, etc, etc). I also like many others would argue for smart reform of the current system rules and length of patents and copyrights granted.
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Re: Efficiency is Overrated, Messy is Good
Huh?!? How is what I'm advocating anything remotely close to central planning? I'm talking about the opposite of central planning. I'm talking about getting the gov't OUT of granting monopolies.
1. Our political system can be massively inefficient. Think about it, all those branches of government sitting around arguing and no laws getting passed.
I'm not sure what this has to do with my point. I agree that gov't is inefficient in most cases -- which is why I don't think they should be subsidizing industry with monopolies.
2. In the late eighties the Japanese with their super efficient companies and consensus system was going to snow under the messy jalopy American system (read any business or newspapers from the time). Gee what happened?
Exactly. The Japanese system was based on central gov't planning. I'm suggesting that we don't need central gov't planning.
3. We are sitting around right now arguing about the marketplace of ideas relating to intellectual property and copyright, you are somewhat right and also I am somewhat right and wrong. It is a terribly inefficient system that we fight all the time (inefficient but fun and I continue to learn and hold you in high regard)
I'm not sure what that has to do with anything... I continue to learn as well and continue to enjoy the debates, but what does that have to do with efficiency?
4. Obviously short term planned efficient economies like the Soviets (and currently the Chinese) made very quick forward progress that petered out.
Exactly. So why do we have a centrally controlled gov't program for securing monopolies? It does the same thing. It may create short-term gains, but it peters out quickly. That's what we're seeing.
5. If one studies societies that can innovate over the long haul versus societies that have lost or never found their inventive zeal, there could be a correlation to strong property and strong intellectual property rights (amoung a whole host of other factors in the mix).
Actually, if you look at the studies you find they're quite interesting. The fastest ramp up in innovation occurs when there are little or no intellectual property laws. It's only once a bunch of innovation has happened and those innovators want to rest on their laurels and stop innovating that IP laws get stronger. That is IP laws are mainly used by those who want to slow the pace of innovation and protect their current market position.
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it's not all about economic efficiency
We want an author who has spent years working on the great American novel to benefit from his work and not have it stolen and published by a highly efficient publishing company that doesn't feel like paying authors. We want people to be able to make a living by their art, their writing or their music.
It is dream of so many Americans that they can work on an invention, perfect the invention, patent it and not have to worry about their years of toil stolen by a bunch of knockoff low cost producers who will give them nothing.
The copyright and patent system may be abused by a few companies or individuals but Americans' sense of what is right and fair will never allow the government to do away with intellectual property. Now maybe we can talk about reforming the system.
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Re: it's not all about economic efficiency
Your bogus assertion of theft notwithstanding, again those are more social rather than economic concerns.
There you go with that bogus theft assertion again. IP industry shills just can't seem to let go of that one despite what the US Supreme Court said.
The main obstacle to reform isn't some common American desire for corporate welfare but rather the huge amount of money those corporations funnel to various politicians.
We already were and we didn't need your permission.
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Re: Re: it's not all about economic efficiency
No, it was right. I am discussing it now so it is being discussed here.
Your bogus assertion of theft notwithstanding, again those are more social rather than economic concerns.
Please explain "bogus assertion of theft". Do you mean if there is no intellectual property then it is not theft and it's ok to copy anyone's work?
The main obstacle to reform isn't some common American desire for corporate welfare but rather the huge amount of money those corporations funnel to various politicians.
What is this corporate welfare you're talking about? I was talking about something completely different - a well accepted set of laws that is part of our societal structure. These laws benefit individuals as well as corporations. Hey, I bet you think corporations are evil, don't you? Is this where you're coming from?
We already were and we didn't need your permission.
No, I believe the discussion is about doing away with intellectual property not reforming the current laws - at least Mike was talking about this - right Mike? In any case, I think ethics and fairness needs to be brought into the discussion because it is a big part of the reason for intellectual property. I am interested in Mike's view on ethics and fairness here in this discussion.
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Re: Re: Re: it's not all about economic efficiency
With a Madonna song, or any other work of art, it is statistically impossible that someone else will independently create the precise same work.
With an invention it is basically statistically inevitable that someone else will independently create the same work.
If we don't protect Madonna's song it may never be created and protecting it costs the broader society nothing in forgone opportunities. On the other hand with the invention if we protect inventions we may get some inventions sooner but at a substantial opportunity cost. Where is the fairness or ethics in granting a patent to one person and allowing that person to shut down the activities of others who invested just as much or more to arrive independently at the same invention. Where is the fairness or ethics in giving a 20 year monopoly to someone for an idea that would have inevitably arisen in the public domain within a year or two anyway?
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Re: Re: Re: it's not all about economic efficiency
I mean that it is bogus to keep claiming that it is theft when the US Supreme Court has ruled that it isn't (as I've already said). I don't know to make that any clearer for you. Are you just hoping that if you shill long enough and keep repeating 'black is white' enough times people will eventually begin to believe the lie?
I'm talking about government granted monopolies to protect corporations from free market competition. And that is exactly what you are promoting.
You'd be better off not making that bet. You'd loose. Again.
Good luck on suckering Mike into that one. I'm Not Mike, but I'd be surprised if he really wanted to discuss your sociological issues with you.
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Re: it's not all about economic efficiency
I've discussed this in great detail before. The claim that it's a moral or ethical issue is wrong. Here's why: by ignoring intellectual property laws you can create a much bigger market -- and if you don't, someone else will and you'll be out of business anyway.
So your options are (a) keep things the same and go out of business when someone destroys your market or (b) adapt to the times, build a bigger market and have everyone be better off.
You're saying that choice (a) is more moral? I'd argue that (b) is a lot more compelling.
If you focus solely on moral arguments for economic decisions, you get to stagnant markets and protectionism. After all, you don't want to buy Japanese cars, as that would "hurt" American car makers, right? The moral argument is wrong. It assumes a zero sum game that simply isn't happening.
We want an author who has spent years working on the great American novel to benefit from his work and not have it stolen and published by a highly efficient publishing company that doesn't feel like paying authors. We want people to be able to make a living by their art, their writing or their music.
I've made it very clear that you can make a lot MORE money. So the above is totally meaningless. Your claim that people wouldn't be able to make money is simply false. I'm not saying they wouldn't make money. I'm saying they'll make more money by understanding which parts of what they do to give away and which parts to charge for.
And, as another commenter pointed out, there's a world of difference between copyright infringement and theft. Don't confuse the two.
It is dream of so many Americans that they can work on an invention, perfect the invention, patent it and not have to worry about their years of toil stolen by a bunch of knockoff low cost producers who will give them nothing.
That's like saying it's the dream of so many Americans to build a car and then have the gov't block all Japanese imports so they don't have to compete. That's not beneficial to society. It's not beneficial to innovation. It's not the job of the US gov't to protect someone who does not wish to keep innovating.
The problem is that you are viewing innovation as a one-and-done situation. However, that's not innovation. Innovation is an ongoing process that never ends -- and the reward is decided by the marketplace who agrees to buy your products. Not by locking up that innovation and making it impossible for that trend of innovation to continue.
The copyright and patent system may be abused by a few companies or individuals but Americans' sense of what is right and fair will never allow the government to do away with intellectual property. Now maybe we can talk about reforming the system.
The same may have been said about the patent system in the Netherlands in the early 19th century. Yet, the citizens there finally realized they were better off without, and so they ditched their patent system, which helped allow the industrial revolution to take hold in the Netherlands, building up some tremendously important industries. It was only later, with pressure from foreign companies and some local companies who wanted to *protect* their position that the patent system returned.
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Re: Re: it's not all about economic efficiency
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Look at the Vaccine market in the US. Forced price controls pretty much encouraged everyone to get out of that space and a couple years ago, one vaccine maker had a manufacturing plant taken out of production and the US had a serious shortage of Flu Vaccine. Cause and effect.
As for protecting the industry, I agree, patents do protect the industry. What happens if its not protected? It goes away. They all become generic drug companies (which by definition do no R&D) and the amount of new drugs stop. You talk of healthcare and I agree, research should be done and is done in all areas, but that is not the role of a pharmaceutical company (again by definition.)
Unless you want to reinvent Economics 101, investment chases return. Eliminating patent protection reduces return. Cause and effect.
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Re:
Again, I point you to Italy prior to 1978. While you're right that it had a thriving generic drug industry, it was also very active in R&D for new drugs. Then, *foreign* pharma companies pushed the Italian gov't to add patent protection. Your theory would suggest that adding patent protection would increase the output of the Italian pharma industry, but it didn't. The pharma industry there mostly collapsed and no significant new pharma discoveries came from the market.
Look at the Vaccine market in the US. Forced price controls pretty much encouraged everyone to get out of that space and a couple years ago, one vaccine maker had a manufacturing plant taken out of production and the US had a serious shortage of Flu Vaccine. Cause and effect.
Yes, you're talking about forced price controls. That's not what I'm talking about.
As for protecting the industry, I agree, patents do protect the industry. What happens if its not protected? It goes away.
That's false, as per the example above. The pharma industry was bigger and stronger in Italy prior to patents being put in place.
They all become generic drug companies (which by definition do no R&D) and the amount of new drugs stop.
Again, that's false. Again, look at what happened in Italy.
You talk of healthcare and I agree, research should be done and is done in all areas, but that is not the role of a pharmaceutical company (again by definition.)
That's because today's pharma doesn't *need* to think about that. If they didn't have patent protection, the industry would look at things differently, and pharma would be looked at from the point of view of better healthcare, rather than just protectionism. In other words, it would become a part of the larger healthcare efforts, rather than a standalone monolith that focused too much money in the wrong areas.
Unless you want to reinvent Economics 101, investment chases return. Eliminating patent protection reduces return. Cause and effect.
You make a huge assumption here that is wrong. Investment does indeed chase return, but eliminating patent protection DOES NOT reduce return. It increases the overall size of the market (which IS econ 101 -- removing protectionism increases market size). What it does do, however, is change where those returns come from. It would require a shift in the market, but you're wrong that it would shrink the market. The opposite would occur, the focus would improve as there would be greater rewards for actually making people healthier, rather than just getting another patent.
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You are advocating Price Setting
Your argument if I am correct flows as follows:
Ideas are not scarce, monopolies should not be given out by the government for ideas (patents and copyrights), therefore there is no market needed for ideas (indeed your title for this piece is "If Resources Aren't Scarce, Why Do You Need A Market?"). Since the ideas themselves have a value of zero they will not be protected and be priced at zero as set by the government.
This is your argument and leads inexorably to failed public policy. Every attempt at price controls has backfired. All economists of all political persuasions agree and have proven this premise time and time again as well as all the historical examples of failed economic systems I provided above. It is price controls if the government sets the price at zero (or any other price).
Your advise to individuals and companies to consider pricing IP at zero and bundling with other scarcer resources may be well argued. However your advise on public policy "price setting controlled by the state to zero" is full of dangerous unintended consequences which others here have also pointed out if you care to listen.
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Re: You are advocating Price Setting
Listen shill, I don't know who you're quoting there but I doubt if it's really Mike.
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Re: You are advocating Price Setting
Again, I'm very very confused by this. Who said "as set by the government"? That certainly didn't come from me. I'm saying *as set by the market*.
This is your argument and leads inexorably to failed public policy. Every attempt at price controls has backfired.
Which is why I'm not talking about price controls. I'm talking about letting the market decide. You keep making claims about what I've said that are the total opposite of what I've said.
However your advise on public policy "price setting controlled by the state to zero" is full of dangerous unintended consequences which others here have also pointed out if you care to listen.
But I've never said that. I honestly have no clue where you think I've ever said that.
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ponzi schemes
I have a number of problems with Singleton, and this is the first: for him, standing on the shoulders of giants is equivalent to a ponzi scheme: everyone down the chain has to keep kicking up. Sooner or later, these things go bust because there's not enough money to support the pyramid.
Second, his paper is just freaking blather. Maybe it's the two bloody mary's I've had--unlike Mike, I've been relaxing this pleasant Saturday, instead of defending all comers--but come on: check out this final graph:
Sustaining creativity over time still takes hard work and, often, considerable resources. Exactly what rules generally produce the best outcome is always controversial, especially as technology changes. But for downstream users of the knowledge, it is ridiculous to pretend that markets and technology are doing more harm than good. Even the sometimes clumsy efforts of policymakers to fix a badly broken copyright enforcement system do not favor the content production side—those efforts are not yet particularly effective. Knowledge and creativity is indeed cumulative. Exactly none of the arguments as to whether intellectual property should be maintained, strengthened, or reformed today attempt to deny this. Noting that we stand on the "shoulders of giants" is a fine sentiment, but markets supported by clearly defined rights will best help us up there.
Even if you remove what should be the humiliating Bushian "hard work," he's trying to wax obscure about a bad point.
Here's what I'd like to see: how has the research into breast cancer been hampered by the people who've patented the gene for breast cancer. They want a taste of any future research, which inhibits any future research. That will show what the Singletonian cost of standing on the shoulder of giants really is.
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Ideas are scarce, Media is not
. 2) It seems to me that IP is much like any other product, the more we pay (patent/copyright) it, the more that is produced.
. 3) On the other hand, the more we pay for it. the less is the Value-Price, benefit, of the product.
. 4) Thus the society should set the patent/copyright protections high enough to get a "reasonable" amount of IP produced, while it is low enough so that the benefits are reasonably high and add on IP development can be made efficiently.
My guess is that in the case of Drugs, we either have to figure out some way to reduce the costs of initially producing and testing the innovative drugs or increase their patent protection.
On the other hand, in the case of copy-cat drugs, entertainment, and most other IP, the protection should be decreased, as most of the reward occurs in the first few years, and the cost of preventing add on IP, protecting the IP, etc. is inefficient.
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Re: Ideas are scarce, Media is not
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Re: Ideas are scarce, Media is not
Not so with patents. In some areas of endeavor strong patent rights may increase the returns to the inventor with the first patent but then put any further development in the field on hold for twenty years.
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Look at all of the innovation that occurred in the web 2.0 space in such a small amount of time. Imagine if all of those simple business methods, design, and function concepts had been patented. There would be little innovation occurring. Look at industries that thrive with no intellectual property protection such as the fashion industry, or the restaurant industry. In these businesses you have pure innovation (in all facets of these business) occurring for the sake of competition. Consumers benefit from this competition and no business have the luxury of laziness. Laissez- faire!!!
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I think....
In the late seventies to early eighties (the exact date was not given in the chapter) when Richard Stallman was working in the MIT AI Lab they (the MIT AI Lab) recieved a xerox printer which was prone to jamming. Stallman wrote a patch for the source which sent any user a message if the printer jammed. Xerox, had not sent along their source and stallman had to find a "Hacker" who could convert binary files into something legible.
http://www.oreilly.com/openbook/freedom/ch01.html
The reason for xerox not sending the source was because of Intellectual property. And in doing so they hindered innovation.
Prior to the "printer incident" software companies sent out copies of editable source with their software, and if a programmer saw that he or she did not like a function of the software and/or needed to add a bit of functionality they were allowed to do so, and then re-release it back into the "pool", this fueled innovation among software companies.
This leads to competition amongst companies by using each other's innovations one one piece of software.
The book linked to describes it far better than I ever could.
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Copyright
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Re: Copyright
I disagree heavily with that statement.
For example: would you like it if I took a few hundred Techdirt articles and put them on my site, say techland.net - and then use targeted ads on my site and earn money from is basically your work. Or even more so, if I copied the entire techdirt website and relocated it...creating an exact copy?
You must be new around here. I have said repeatedly that if you want to advertise Techdirt that way, go ahead. There are currently a bunch of sites that do exactly that. Go for it.
What happens is the same every time. First, your site gets almost no traffic. Those who do go to your site quickly figure out that the content actually comes from this site, so they come here instead. Why? Because it's faster to get it here, plus the actual authors are here and willing to discuss the posts, and there's a good group of people discussing them. You don't get that at your site.
Second, they realize that you've just copied some other site, so your own reputation is destroyed.
So, basically, copying our content harms you and helps us.
So, yes, if you want to do that, please, go right ahead. I'd love to get more traffic thanks to you.
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The big problem for us (US) is that we subsidize the rest of the worlds R&D and if we stop (though elimination of patents or price controls, which amount to the same thing) world drug discovery will fall.
It is simple, if I could manufacture Lipitor and sell it for $10 a month per consumer, Pfizer would lose over 70% market share in a year. The overall market wouldn't get bigger in terms of overall profit, you would just reallocate the wealth.
Maybe that's your goal here, I don't know.
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Re:
The US subsidizes the rest of the world's R&D? Do you have any idea how ridiculous that sounds?
Maybe Pfizer should put more effort into being competitive and less into turf-trolling forums.
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Furthermore, in terms of economics, the royalty (welfare) paid to the content provider becomes a perpetual tax on the product, it artificially increases the cost of the product that the consumer is buying.
Lets look at this from a slightly different angle. If you buy an asset like a car, the value of that asset depreciates over time. At a certain point it becomes "worthless". The content industry does not seem to accept this fact that their content can become worthless. The DVD clearance bin at Wallmart is indicative that content does, in fact, loose value over time.
If we look at a logical extreme of Singleton's argument, we would all be paying ourselves royalties every time we use fire. Since the use of fire was "invented" many years ago, we are probably all descended from that inventor. Obviously paying ourselves a royalty is an absurdity, but in the long term that appears to be one of the logical flaw's of Singleton's argument.
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Shakespeare and Newton
Consider Newton and Shakespeare - two of the towering intellects of Western culture - perhaps the two most important intellects the West has ever produced.
No one else would have precisely recreated Shakespeare's works in the intervening centuries if he had not existed and so we would be none the poorer if we had to pay Shakespeare's heirs every time we perform one of his plays.
On the other hand, the discoveries of Newton would have been found by someone else eventually and there is therefor no reason why his heirs should have any perpetual rights.
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Re: Shakespeare and Newton
Joe, while you and I agree about many things when it comes to patents, you are sorely mistaken when it comes to copyright. The purpose of copyright is simple: it's to create incentives for the creation of content that wouldn't occur otherwise. The fact that Shakespeare created his content without copyright should make it clear that none was needed as incentive.
What you're proposing is a *welfare* system for authors, which is totally unnecessary. And, you're wrong that we'd be "none the poorer" if we had to pay Shakespeare's heirs every time we perform one of his plays. That added expense would likely limit the use of his plays and probably would have had Shakespeare's greatness faded long before now, as the expense would have become too much of a burden.
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Re: Re: Shakespeare and Newton
You're right that we do disagree about Copyright. Basically I do think that creators of original works have the moral right to restrict the use made of their work. You tend to confuse your views of what the sensible thing for creators to do ( publicize their works broadly and make them easily available ) with what you feel they should be required to do. I think a creator has the moral right to stuff his work under a pillow if he wants to. The only time the actions of a copyright holder engage me is when they try to recruit the broader society into enforcing their business model. I think the broader society can say: "we will not allow our courts to be abused by you in this way"; but we do not have the right to say: "you must permit internet downloading".
If there is a DRM scheme widely implemented it should allow for different types of rights so that artists can designate their work as, for example, "public, non-commercial" just as we have in the specific area of software now.
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Love the article but!
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Politics
"that doesn't matter" or
"that is beside the point", and
"you should be asking that, you should be asking " or
"what you're saying is
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Politics
Mike should be a Politician. He brings up tired issues, responds to direct questions indirectly or with
"that doesn't matter" or
"that is beside the point", and
"you should be asking that, you should be asking {unrelated question}" or
"what you're saying is {something sensationalist that is actually pretty far from what you were trying to say}" and
"I disagree with that statement (but I won't tell you why or how how *I think* you're wrong)" and
"oh thats a good point, but I won't admit it so instead I will say 'go ahead and do it and see what happens, it won't work out how you think' because I know you don't have the resources or drive to prove me wrong on a large scale"
But really, thank you so very much by discrediting your own entire post with such a sensationalist analogy that you didn't even realize contradicts your point. Oxygen is not scarce, it is abundant, so abundant that there is no market for it because everyone can get it for free. Once clean air becomes scarce there will be a market for it and it will cost money, and probably come in soda cans ala Space Balls.
I suppose in the end you can claim victory. After all, you created a "news" post that got a ton of replies. The content of the replies doesn't matter, just the quantity. Kind of like the "lets see how many myspace friends I can get" game that your mental peers play.
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Re: Politics
If we skip your random bashing of me, the main point you make is bizarre:
But really, thank you so very much by discrediting your own entire post with such a sensationalist analogy that you didn't even realize contradicts your point. Oxygen is not scarce, it is abundant, so abundant that there is no market for it because everyone can get it for free.
That's the exact point I made. I'm not sure how I've discredited myself, if the point you make is the same as mine. Oxygen is abundant. I didn't say it was scarce. I said it was abundant -- which is why there's no market for it. The same is true of an idea once created. So if there shouldn't be a market for abundant air, why should there be a market for abundant ideas?
As for your other points, I think that (despite your claims) I am more than willing to explain my position in detail and back it up with research and facts.
And, if you believe that I really *would* get upset if someone else copied Techdirt (as you imply) and that I'm just saying I wouldn't for show, then why don't you go try? The fact is that there are a bunch of sites that already do copy Techdirt, and I've certainly never sent our lawyers after them, nor would I. Exactly what I predicted came true. Those sites get almost no traffic (many have long come and gone once they realized this) and the few people who do discover them quickly come here instead. So why would I complain?
So, please, go ahead and point out a direct question that I did not answer and I will do my best to answer it. You may not agree with the answer, but you're wrong to pretend that I avoid responding to my critics.
I suppose in the end you can claim victory. After all, you created a "news" post that got a ton of replies. The content of the replies doesn't matter, just the quantity. Kind of like the "lets see how many myspace friends I can get" game that your mental peers play.
You really must be new around here. I don't care how many replies a story gets (and, honestly, this one didn't get that many given the topic and the timing of the post). All I care about is getting these ideas out there. If anything, it *upsets* me to see how many people still don't seem to understand these basic economic realities, because it means that a lot more companies are going to face troublesome competition when they could be better prepared for it.
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You are right, this is branding/mindshare. Take any commodity and build a brand around it and now your commodity has an advantage in the marketplace. Branded commodities can still dominate the marketplace, as in your example, without any type of special rights on the formula of the product.
Just because something is no longer scarce does not mean the laws of supply and demand do not apply.
This is true but I think this statement does not fully acknowledge the Economics of Abundance. Let's take the analogy of snow (not air or water, all global warming issues aside). There is a saying in sales "this guy is so good he could sell snow to an Eskimo." This saying acknowledges that snow to an Eskimo is not a scarce resource. So, to an Eskimo, snow is not a resource worth paying for because it is so abundant. Of course, and Eskimo might need snow if it were not abundant, and might pay for it. And the maker of that snow might try to create whatever kind of monopoly it could so that it is the sole provider of snow. But really, the sales of the snow should be an open market to whoever can make it at the lowest cost, deliver it in the most innovative ways, ect.
It's the implementation of the idea, not the creating of the idea, that is rewarded.
Ideally, this would be true, and we should do all we can to make this true, but right now this is no longer true. You can now reap the rewards of a patent if you are of the owner of a patent by sewing innovators using that patent weather you as the patent holder are actually using it to produce innovative product or just sitting not it.
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Whole Lot is Mything...
Mike is for a Free Market
Like most sane and intelligent people on the planet Mike is for a market with certain restrictions. To paraphrase Mike; "Why should someone get paid for work they did 50 years ago?" "How much has already been made off it" is a moral question and has no place in a Free Market philosophy.
Patents inhibit innovation
Some people inhibit innovation. Certain rulings by people in governing bodies have created more incentive to inhibit innovation than existed before. However, the inclination of some people to avoid paying to play has existed for much longer and is, in my opinion, one of the reasons patent law was instituted. The basic, fundamental nature of people has not changed enough in the last 300 years to allow for the cessation of patents or the laws that go with them.
Thomas Jefferson's Point on the Topic (quoted earlier)
Great political press but not very accurate, even as an analogy. First, entropy is a fact of the universe so no idea will be held indefinitely unless energy to hold it is continuously applied. Second, you can spout/distribute your ideas all you want but I am in no way ever forced to receive them. Acceptance of an idea is never guaranteed.
Ideas are not Property and cannot be stolen
Money is nothing more than the the idea that a chosen medium can be exchanged for goods and services and be used as a measure of their values on the market. Money is the ultimate expression of Intellectual property. Few people would say that nothing is lost when money is stolen, or that money cannot be stolen. I believe even fewer would say that the intrinsic value of the chosen medium is all that defines its value.
Without some form of incentive all creation and innovation will stop
People created and innovated before patents and copyright were instituted. People will continue to do so even if all patents are revoked and never granted again. Of course that has no bearing on whether patents and copyright are needed because it doesn't apply to them; they don't need monetary incentive. Patents and copyright are for those that desire monetary compensation for the effort they put forth. I believe that the group that desire money outnumber those that don't and will continue to do so. I believe Thomas Jefferson also believed that and sided in favor of patents.
The Supreme Court of the US (i.e. the law) has ruled that Copyright infringement is NOT theft
Would not such a ruling have overturned every copyright law currently written in the US? I haven't seen any riots about this and surely there would have been SOME in every major city here. I didn't see any such article here at Techdirt using the search feature, either. I seem to recall that the ruling was that nothing was stolen when copies were made for personal use, as personal use copying is allowed in current copyright law and to clear up an apparent conflict in the DCMA law that would prevent such copying by not being able to circumvent copy protection.
It's the implementation of the idea, not the creating of the idea, that is rewarded
Not true, as is seen in the market of writing songs and screenplays, as well as others. Just because you can create a play (e.g. create the idea) doesn't mean you can implement it (e.g. act your way out of a wet paper bag) and the same holds true for patents. The Idea Man is accorded just as much incentive as someone that implements the idea.
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Re: Whole Lot is Mything...
It's the implementation of the idea, not the creating of the idea, that is rewarded
I agree with your analysis and metaphor, however, the current system doesn't reward marketing, sharing, or licensing the idea. The screenplay example is good, however I think it takes away from the main issue which revolves around companies, who have the resources, for one reason or another, postpone litigation.
Take for example the RIM issue. NTP was a patent holding company that for reasons unknown to us, kept hold of patents, and (possibly) waited several years after RIM went to market with their product. Vonage was sued after several years of offering their products, Microsoft posed similar action this last weekend against Open Source. The question is what is the motivation behind these companies waiting, and how do you incent companies for protecting their IP? Should the incentive be negative- damages be less the longer they wait? Maybe we move to an arbitration system instead.
Just something to chew on.
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Re: Re: Whole Lot is Mything...
I don't know that reward is the best term to use but the essence is not correct. The entire marketing industry has grown to its current size because the current system rewards the marketing of ideas.
Licensing in just one of the ways that the incentives offered by patents can be realized. Mike has also pointed out that sharing, that is to say bundling goods and/or services to increase value, is another way that incentive can be realized.
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Re: Re: Whole Lot is Mything...
Patent hoarding is a ethical problem as well as an educational problem. Licensing IS one of the ways to make it on volume, but that phrase has been beaten so many times I think most people simply discount it out of hand. If the companies hoarding patents would license at a reasonable rate then most of the gripes about the system would go away.
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Money is a great deal more than a mere idea.
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Re: Money is a great deal more than a mere idea.
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Copyrights
Don't confuse patents and copyrights. They are COMPETELY two different things. Our forefathers DID NOT WANT to provide a copyright law in our constitution, but did so to further creation and innovation, not stifle it. The constitution says that copyrights may be provided "FOR LIMTIED TIMES" as set by Congress. Originally, copyrights were only good for two renewable terms of 7 years.
Quite framly, today's terms don't appear limited. Most extend to 70 years past the author's DEATH. This is totally ridiculous if the motivation was to provide for more creation, because once the creator is dead he can no longer be motivated. In addition, what limits am I going to see? Will I see any copyrights created before my birth reach the Public Domain? With the current terms, not likely, so copyrights might as well not have any limits, because I am not going to benefit freely from most works created in my lifetime, because they will never reach the public domain before I die.
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