Christopher Buccafusco and Christopher Sprigman have a very interesting article, Valuing Intellectual Property: An Experiment, in the latest Cornell Law Review. From the introduction:
In this Article, we present an experiment that demonstrates a substantial valuation asymmetry between authors of poems and potential purchasers of them. As we explain, we created a market for poems modeled after a market for licensing IP. The observed differences in valuation indicate that IP licensing markets may be substantially less efficient than previously believed. Our results suggest that (1) the preferences of IP creators, owners, and purchasers are unstable and dependent on the initial distribution of property rights in creative works, and that (2) large gaps arise between WTP and WTA even though the poems are nonrival property and the contemplated alienation of the property is therefore only partial.
Our findings suggest that private transactions in creative goods may face significant transaction costs arising from cognitive biases. These biases in turn drive the price that creators and owners of IP are likely to demand considerably higher than buyers will, on average, be willing to pay. This discovery does not mean, of course, that transactions in IP will not take place—we see such transactions happening every day. Our research suggests, however, both that IP transactions may occur at a frequency that is significantly suboptimal and that the baleful effect of cognitive and affective biases is likely to be more serious for transactions in works of relatively low commercial value or for which no well-established custom or pattern helps to inform valuation. These results have considerable implications for the structuring of IP rights, IP formalities, IP licensing, and fair use.
ChrisTS says:
My guess is that a very similar disconnect occurs in all the arts. I’m often astonished by the prices unknown artists and artisans charge for their work, even on a generous estimate of the supplies and work that must have been involved.
Outside of arts (including literary arts) is there such a disconnect between what producers and purchasers see as the reasonable value of the product? (I’m assuming we can somehow take out the effects of advertising/branding/etc. in assessing the disconnects.)
December 4, 2010, 6:03 pmprogressoverpeace says:
IP law relies heavily on legal rights structured as “property rules,”
which establish an owner’s ability to exclude others, as distinguished
from “liability rules,” which permit access to an owner’s property but
mandate some payment to the rightsholder. The decision to formu-
late most IP rules as providing rights to exclude is based largely on a
belief that individuals engaged in market transactions will do a better
job relative to the government (e.g., courts, agencies, and legislatures)
at setting prices for access to IP.
Is this how people see it? I always assumed it was because we wanted to transfer, as directly and powerfully as possible, the concept of property rights to what we consider to be “property” – hence the name, IP. If I create something, then I should be able to dictate its use as much as is reasonably possible. I always thought the problem was with stuff getting certified as original IP and gaining control and protections when it wasn’t all that original, to begin with.
I didn’t read the footnoted paper, so maybe I missed a bunch of stuff.
December 4, 2010, 6:21 pmSuperSkeptic says:
It makes intuitive sense to me, at least, that if there is a relatively high demand for any particular piece of IP, its “value” will be more easily found or estimated due to the aggregated multitude of those interested, e.g., a product patent versus a poem by some nobody that only maybe say three people like.
I’m also not surprised to hear that both will “over-value” their IP – the endowment effect is stronger in self-created goods. More interesting in this respect is the similarity in “over”-valuations between the author and a subsequent non-author owner of the IP.
That said however, I am naturally superskeptical of the authors’ own valuations of the regret-aversion and optimism biases leading them to the admittedly tentative conclusion that property rights conceptions of IP should shift toward liability rules. I’m skeptical largely because it shifts the paradigm of private individual decision-making to collective decision-making – all in the name of efficiency. Where have I heard that kind of thing before…?
December 4, 2010, 6:29 pmisland says:
A silly article.
All Art is subjective and has NO intrinsic value.
Everyone knows that.
The famous dead painters whose art now goes for millions is really just a commodity to give the buyers bragging rights.
From this article, I think, one can assume that the writer would conclude after thorough analysis that the “ant covered Jesus” at the Smithsonian was overvalued by the creator, and thus was in a public venue because private parties would not purchase it.
That is why most all public art is awful– no private party would buy it for themselves– not even the government official who buys it with my money for public display.
December 4, 2010, 6:33 pmChris Travers says:
As a software engineer and an author, it’s not how I see it.
I see the term “intellectual property” being essentially an accurate accounting term relating to certain forms of intangible assets. But what’s really going on legally is a sort of societal quid quo pro involving publication of a work (with a patent, it’s publication of the invention so that after the term is up anyone can use it, with copyright it’s publication of an expressive work). This quid quo pro is supposed to reward authors and so forth for bringing their works to the public.
The thing is that since it is an asset (i.e. property) and has a definitive life, it gets addressed in accounting forms as a depreciable asset. Because of it’s nature, “intellectual property” is a perfect way to look at it when trying to do financial accounting. It’s just like a car lease, where you own rights for a time, and then those go away.
In fact, this “leasehold” idea is a pretty close parallel. I’m going to suggest we stop talking about “intellectual property” since such really belongs to the public and start talking about “intellectual leaseholds” instead, which are of course granted back to the artists and inventors.
December 4, 2010, 7:19 pmZiz says:
All value is subjective. A human being must desire something to give it value. No value exists independent of human desire.
December 4, 2010, 9:06 pmMark N. says:
This is often good business, though, because art purchasers partly use price to evaluate the perceived quality of a work. If you’re selling a painting for $50, you have no chance of being taken seriously by the “serious” art market; but if you’re selling it for $2000, you might.
December 4, 2010, 10:06 pmAnonymous Coward says:
Having not read the paper yet, I wonder to what extent the problem is that of not understanding the size of the prospective market. For example, it seems like it would be easy for an artist to say that they want to make at least $25,000 from a work. But if you don’t know whether you will sell 20,000 copies or 1,000,000 at a particular price point, you don’t know how to value. And the normal negotiating strategy of starting with a high price can easily deceive: If you would sell 20,000 copies at $0.99 but 1,000,000 copies at $0.09, but you start at $0.99 and quickly sell more than 10,000 copies, you can easily deceive yourself that you are near the profit maximizing price even though a substantially lower price would yield a substantially larger total revenue.
The Internet exacerbates this significantly: If you live in 1990 and your unit costs of reproduction are $0.50 to stamp a CD then selling a single for less than $0.99 is likely not profit maximizing. Certainly selling for $0.09 is not, even if that is the revenue maximizing price, because it causes a loss per unit. But throw in the Internet where a) reproduction costs are negligible and b) there is a prospective market of over six billion people, and it becomes easy to make money by selling for a low price. And on the other side of the coin, there are more competing artists who may be willing to sell at a low price due to the possibility of high sales volume, thereby reducing demand for higher priced works. So it is likely that the profit maximizing price of works on the Internet is very low.
This is, constitutionally, the opposite of what “intellectual property” (at least patents and copyright) is about. The idea is to “promote the progress” by giving the least possible control necessary to convince the artist to create the work, and then likewise to have those rights expire as quickly as possible without invalidating the incentive. (And if you don’t think so then we had better install independent invention as a defense to patent infringement and start assigning the copyright on a derivative work to the maker of the derivative.)
I agree that liability rules may not be the answer. There is no reason to expect bureaucrats, after being lobbied by biased and irrational interested parties, will come to any better a decision than the market.
It strikes me the better answer might be to make it more of a property right: Make the only remedy to destroy the copies and get an injunction against future infringement. No damages. Just contempt of court charges if an infringer continues to infringe after being ordered to stop. The result would be to kick all of the frivolous infringement suits out of court, because it wouldn’t be worth the plaintiff’s time if the actual infringement (rather than trumped up statutory damages) is not causing the plaintiff material harm.
What that also does is make the copyright holder and the infringer evaluate the value of the work in comparison to the cost of going to court: The prospective customer/infringer would rather do the right thing and pay a fair price for a work than get a C&D from a lawyer and have to hire their own lawyer to deal with it. The copyright holder will set the price fairly (i.e. lower than their inflated estimate) because if they set it too high, many people will think they’re asking too much and they’ll have reconsider selling at prices more people are willing to pay as compared to hiring a lawyer to send out nastygrams or file lawsuits. (The latter will, of course, be worth it to the artist only if the work really is highly valuable.)
December 4, 2010, 11:51 pmGil says:
The gist of the conclusion is that I.P. makes things more expensive so it should be abolished to make things cheaper. Uh huh. If grocery stores halved their prices tomorrow then more goods will bought so would the government being doing a service by ordering grocery stores to halve their retail prices at their own expense?
December 5, 2010, 12:29 am1040 says:
To quote a great thinker of our times: ERRONEOUS!
December 5, 2010, 1:06 amTurtle Noneck says:
And during the subsequent discussion of who should be appointed as the “czars” to run the new govt bureaucracy for IP appraisal, the authors loudly cleared their throats several times.
December 5, 2010, 3:11 amA. Criminal says:
There’s a difference: art has zero utility*. Not fungible. Van Gogh’s paintings and (surprisingly crummy) drawings were literally worthless during his lifetime, but became very expensive thru chance and the magic of human status-seeking. *The utilitarian(?) value of a painting might be considered to be the cost of a good copy of the painting, which is why forgery is such a big concern in the art world: the very low intrinsic value (utility) of the original. A good forgery of a car – a forgery that’s hard to detect – would be worth about the same as the car itself because they have the same utility, so they’re fungible to a large extent.
December 5, 2010, 6:15 amisland says:
I guess –when you take it to the ultimate– you are right.
December 5, 2010, 7:23 amI was assuming people valued life and things that helped them stay alive like food and shelter.
That was an error.
Art is an asset to a better grade of life.
But there are people who do not desire nor value life, for various reasons. So yes “A human being must desire something to give it value.”
Stephen Lathrop says:
I make photographs and sell them at low-four-figure prices, but less often than I would prefer. It’s not obvious that if I lowered the prices I would sell more, because people who buy photographs as art tend to have money. People who don’t have much money mostly don’t buy art photographs unless they are in the pictures.
There’s another reason for the higher prices: even if I doubled the prices, the sales volume would still have to increase to repay the effort needed to make and market the pictures. Ansel Adams has been quoted as saying that if you make 10 really good pictures per year you’re doing very well. That’s working at it very hard all the time, and I’m no Ansel Adams.
So the high price for one of my pictures is predicated on a model of what it would take to make the business viable if it ever really took off. A lower price would require such a high number of prints of each photograph that their value as art to the purchaser would be undermined. And for any image that has already been sold to a client at a higher price, any reduction now would be a breach of faith.
You may have ideas about whether that line of reasoning is sound, but you won’t have any better idea than I do about whether you are correct. They are my pictures and I price them as I choose, for my own reasons. I get the sense that the authors write in support of the if-I-don’t-think-your-work-is-valuable-it-should-be-easier-to-steal-it movement.
December 5, 2010, 8:07 amdevilsadvocate says:
thanks for the link Orin. I always enjoy reading the experiment designs. The general setup here, of course, violates the real world like crazy. The folks wouldn’t necessarily have written or bought a Haiku in the first place if they weren’t being paid 15 bucks to take part in the experiment.
So the whole setup overvalues Haiku to being with
(if I should never
read another Haiku in
my life I’ll be fine )
conflict of interest warning: I’ve got a blackbelt in Haiku.
But these great and powerful collectivist utilitarians know the value? Right!
Look, I think these thought experiments are interesting but they seem ultimately more irrational than the criticized quasi-rationalism of the market.
The example of payment for hunting permits in the paper is a great example. I own the hunting rights to my farm but they are of no utility to me because I don’t hunt. So how does that affect my endowment effect.
But I digress. Just because the marginal cost of distribution is reduced by technology doesn’t move the utilitarian result to some natural LCD anyway because it actually creates more of a falsehood to call these goods non-rivalrous. There is no shortage of IP regardless of the endowment effect. Because of the low marginal cost many people have adopted a model of effectively giving away their IP to maybe make it more valuable in the end or to make future creations of theirs more valuable.
None of this dynamic is remotely captured in these half hour experiments. The point is that, these goods are rivalrous with each other for the opportunity cost of being appreciated! So forget kids downloading copywrited music, now you got people waiting in line for 6 months to get their stuff on pandora radio so it can be heard for free. That is the market doing what these author’s seem to suggest should be done by a consensus of academics, or government authorized academics. They are always solving yesterday’s problem.
The marginal cost driver now is not production of copies, it is getting noticed. And one model remains deliberately inflating ones WTA [willing to accept price] as a way of signaling elite status. Another is going on Oprah. So what?
December 5, 2010, 8:18 amprogressoverpeace says:
Perhaps I am taking too broad a view of intellectual property (a lay view), but that Constitutional reference is only with respect to affirmative governmental protections against unlicensed copying and reproduction of easily copied and easily reproduced works. Works that have no natural protections, as it were. Those protections are not cheap to enforce and cannot be carried on forever.
But, if I create something that no one is able to reproduce without explicit instructions from me, even if released publicly (such as CoCa Cola) then I don’t depend on the government’s enforcements to protect my ownership of the intellectual property. It’s mine. No one has the right to demand the secret. I have a certain amount of extra “insurance”, given by the government, for the time of the patent in case someone does get their hands on the secret, which helps to promote that work. Of course, for copyrights, there are no secrets at all, as the work is exactly what is seen.
For regular, physical private property, it is the responsibility of the owner to physically protect it and its use (as was made clear by the SCOTUS decision that states have no affirmative responsibility to police and enforce law). It is to me to protect my land or my car. It is Coke’s responsibility to protect its formula. This is impossible with easily copied or reproduced intellectual property and so, in order to make these sorts of intellectual property more like real property (and ownership) the government creates an additional level of protection for the owner of such easily taken work.
I would also note that the Constitution, interestingly, places the qualifier “useful” on the “Arts” part. I figure that courts have probably ignored this (as the example poem would likely not fall into the category of a “useful” Art by most people’s estimation) but it is worth noting, especially given the example of the post.
Viewing intellectual property as real property, for purposes of ownership, “promote[s] the progress of Science” in the same manner that real private property and ownership rights promote the progress of individual liberty (which cannot even exist without private property rights).
December 5, 2010, 8:32 amGato says:
Given that prices for art (read copyrighted works) are subjective in value and therefore the transactional costs in their purchase and sale tend to fluctuate depending on the mood of the buyer, wouldn’t it be great if there were some sort of large organization that purchased the interests of the various artists, established a pricing scheme that allowed for the widest distribution and sale of the goods (and therefore highest profit), and licensed the artistic goods based on that pricing model to individuals?
Such a scheme would increase the visibility of these artists (allowing them to make money on side projects, such as a painter who wants to hold a public exhibition of his art), expose their art to more people (allowing them to enjoy “a better grade of life”), and allow these artists to earn a profit from creating popular works of art.
It’s almost a dream come true for artists to distribute their art, purchasers to have access to art, and just about everyone who isn’t a free riding pirate.
We could call it something like the “Resale Industry for Artists and Authors”*.
*actual language subject to negotiation.
December 5, 2010, 8:50 amprogressoverpeace says:
but that Constitutional reference is only with respect to affirmative governmental …
Oops. I meant to write, “reference is only important with respect to”.
(as the example poem would likely not fall into the category of a “useful” Art by most people’s estimation)
Just to be clear, I understand that the poem would come in under Author[ship] but I just thought the “useful” modifier was worth noting.
December 5, 2010, 8:57 amsardonic_sob says:
Exactly. How is this any different at all from the zillions of people who still refuse to believe that their houses are not “worth what they paid for them,” even though the market says otherwise? There aren’t many transactions I’ve engaged in as an attorney where the owner of a thing, be it an IP right, a physical object, or a particular kind of labor, didn’t think it was worth more than the person who was trying to buy it. And the disparity can be just as spectacular in the case of those latter two as in the case of the former.
Bottom line: this is stupid.
December 5, 2010, 8:59 amsardonic_sob says:
That went by a little fast.
My impression of the deal has always been as follows: “Mr. or Ms. Creative Individual, we as a society would like you to teach us how to practice your invention/share with us your artistic creation. You don’t have to: you could keep it for yourself, or just discard it as too good for us unworthy lot. But if you will, we will provide to you a limited monopoly so that you may, if you so desire, enjoy a certain amount of financial reward in exchange for the rest of us getting the benefit of it and, eventually, it becoming the joint property of us all.”
Your way doesn’t work, because without IP law, the creators have nothing to bargain with.
December 5, 2010, 9:04 amBen P says:
This is another interesting facet in this discussion.
In the “serious” art world, an artist who would sell 20,000 (or in some cases even 2) copies of the same painting would be deemed not serious. Particularly with paintings the presumption is that the painting is original and unique. (which also plays into the debate over forged art). Painters who sell mass art would often be derided as commercial artists. Truly famous (and mostly dead) artists may have posters and other reproductions of their art sold, but that’s also considered “non-serious” art for anyone purchasing it. You can’t buy a framed poster of a van gogh painting and say you “bought a van gogh”
A market (or sub section of a market) where every good sold is unique is necessarily going to have some interesting pricing issues.
On the other hand, even the most “artistic” photographers will rarely hesitate to sell multiple copies of a photograph. It would certainly be possible to pirate the work of a professional photographer, but one would rarely hear of a “forged” photograph.
You see this in the price. As someone noted above, galleries often ask thousands of dollars for the work of even mostly unknown artists, whereas (absent special circumstances) purchasing a legitimate print from even the best known photographers at a consumer level is rarely near that.
December 5, 2010, 9:39 amMLS says:
Just a point of clarification, in Article 1, Section 8, Clause 8 the term “science” pertains to what is now embodied in copyright law, and “useful arts” is embodied in patent law.
December 5, 2010, 10:45 amprogressoverpeace says:
MLS,
Thanks for the info. I guess that’s an argument I won’t be making anymore :)
December 5, 2010, 11:01 amtamerlane says:
As Egil Skalagrimson demonstrated, sometimes a good poem can be worth your life.
December 5, 2010, 12:47 pmDarleen says:
Chris Travers
I find the statement curious because it appears to declare the labor of certain classes of people public property at the moment of creation.
Or even before? Could the government sue an inventor, or even jail one, who refused to bring an invention to the public? How different would that be from the government jailing someone for refusing to work? Does all labor ultimately belong to the state?
December 5, 2010, 12:49 pmBen P says:
I’m reasonably sure he meant “public” in this case as “in the public domain” which is true.
Intellectual Property law is statutory in nature. Under english common law there was no particular rule regarding property rights in ideas. In England at least patents and copyrights begin with the idea that the crown could grant monopoly rights to particular individuals. (in the case of copyrights it was a license to print).
If congress should so desire they could repeal all of American intellectual property law tomorrow and you’d have no real legal recourse for others taking your intellectual property.
December 5, 2010, 1:03 pmChris Travers says:
What about we just reduce copyrights to reasonably limited times?
December 5, 2010, 1:12 pmChris Travers says:
Even in the absence of copyright!
December 5, 2010, 1:13 pmDarleen says:
Ben P
Certainly, but that would no more wipe out my inherent right to my own labor then congress passing a law wiping out my free speech right.
I’m working my way through the linked document and find some of the assumptions where it regards what can only be described as the moral basis of property rights interesting — that collective “rights” to an individual’s own creative labor not only exist, but that they can trump the individual if such individual is not “cooperative.”
Page 43:
If the state can force an owner to relinguish his/her property rights due to societal utility because the property in question is result merely of “brain labor”, why should other, more tangible property (land, cash, assets) be treated differently? If I decide to not spend as much money this year on Christmas gifts as I did last year, am I not using my property in a way that negatively affects society? At what point does the state get to micromange my choices about my property on the basis of “market failure” to live up to “societal utility”?
The state can either secure or frustrate my rights. However, it doesn’t mean those rights have ceased to exist.
December 5, 2010, 1:51 pmDarleen says:
In addition:
And that would be the one and only time my IP would be taken; why should I ever create/invent again?
Let’s see the state, which already wants to punish people for not participating in an economic decision (mandated health insurance), punish creators for refusing to create.
December 5, 2010, 1:55 pmBen P says:
Are you seriously asking why people would create say, music or paintings, without a financial incentive to do so?
Either way, that’s completely beside the point. You can theorize all you want to about natural rights and a right to the products of your labor, but ultimately if there’s no legal regime in place that allows you to enforce those rights against other people, they mean very little.
Absent a regime of intellectual property law, once an idea is out there it is “in the public domain,” anyone who can discover the idea is free to use it for their own benefit. I’m not sure where this fantasy of the government forcing people to turn over their intellectual property is coming from.
If someone could discover the idea and use it for free, why would they pay for it?
On the other hand, it is possible as you suggest, to keep your idea secret. It is still possible to make money from secret ideas, the recipe for Coke for example.
But there’s a distinct difference between the ability to make money from an idea, and the ability to sell that idea directly.
The secret recipe to Coke is certainly worth millions to competing soft-drink manufacturers. But if I were to steal the secret recipe for Coke and post it on Wiki-leaks, the recipe immediately becomes worth zero because it is “public.” No one would pay me money for something they can obtain for free.
Of course all of this depends on the inability of people to discover the precise recipie for coke from the soft drink that is sold. If that were possible, the whole secret collapses.
Suppose it were possible, what do I do then? I take the “recipie” down to the Patent office and register it. As part of the process I must make the recipe public, but in exchange I get a monopoly on making Coke for 14 years.
Now the recipe has an ascertainable value. I can sell the recipe, and it’s value is worth the profit from 14 years of Coke sales.
The question being asked is what that 14 years does to the price of the sale, and whether 14 years is too long? or too short. (and remember patents are short, in many cases copyrights are now 90 or 100+ years)
December 5, 2010, 2:58 pmJustin Levine says:
Darleen –
“If the state can force an owner to relinguish his/her property rights due to societal utility because the property in question is result merely of “brain labor”, why should other, more tangible property (land, cash, assets) be treated differently?”
Precisely because they are tangible, and therefore scarce. It is scarcity which creates value, not the amount of “brain labor” that went into it. Intellectual property has no scarcity, except through artificial means created by the government’s copyright regime.
The notion that you have a “property right” in “brain labor” is a flawed premise to begin with.
For a more detailed answer to your question, I suggest you read Stephan Kinsella’s work “Against Intellectual Property” setting forth the reasons why we should treat intellectual property differently from real property. You can read it here:
http://mises.org/books/against.pdf
December 5, 2010, 3:05 pmBen P says:
Which is basically what I took 500 words to say.
I guess brevity’s never been my strong suit.
December 5, 2010, 3:13 pmsardonic_sob says:
I take photographs because I like to take photographs. I do so even without any significant financial incentive.
However, when I was with a stock agency, I took more photographs and took more care to both take at least some photographs I thought would be useful to others and to get them in front of others who might enjoy (and therefore pay me to use) them.
Now that a) I am no longer with a stock agency and b) I have had any number of morons steal… I mean repurpose… I mean creatively transform… Hell, whatever the word of the day is… my photographs and use them both for commercial purposes and just for ordinary idiocy without asking permission, I do not put photographs where the public can see them any more. I just take them for myself.
Now, it’s entirely possible I’m just a greedy old misanthrope (scratch that: I am definitely a greedy old misanthrope) but I assure you that incentivization and disincentivization have very real impacts on the nature, amount, and distribution of creativity in at least one actual artist’s case.
December 5, 2010, 4:11 pmDarleen says:
Are you seriously asking why people would create say, music or paintings, without a financial incentive to do so?
Of course some people may continue to create, but you seriously think someone will do so on a regular basis when free-riders profit from it, not the creator?
If you get a group of people together and tell them “no matter how hard or creative any individual in this group works, you will all be compensated exactly the same and no one will even receive credit for their individual effort”; will the group work up to its most talented member or throttle back to its most mediocre?
Human nature is such that most will eventually rebel at being exploited – whether or not that rebellion is active or passive.
A psychologically fit human being will refuse to be a sucker for long. There is a reason the more collectivist a society, the less innovation that society produces.
Granted, there are many issues in a natural rights approach to IP, especially in the teasing out of what really is a unique creation as opposed to a discovery of a pre-existing reality. Intellectually rigorous debate is not only welcome, but necessary in defining and redefining the boundaries of ownership and responsibilities in an always changing technological/information-based society. However, the locus of such debate on rights should always remain the individual. Either human beings are ends in and of themselves, or some are the means to others ends.
December 5, 2010, 5:12 pmDarleen says:
I just remembered an example, albeit anecdotal.
About 25 years ago, one of my friends was an elementary school teacher when the school district decided to try a new approach to teaching. No longer would it be that nasty cut-throat competition for grades based on individual merit. No siree. It would be a “cooperative learning” environment, where teachers were to divide students up into “balanced” co-op groups. Theory was that it would be easy to instill cooperative learning behaviors where goals for the group would be equally worked on by its members, with the more talented members would mentor and help the less talented, everyone reaching their potential and all members of the group getting the same grade based on what the group turned in.
My friend was beside herself by the end of the first year. Early on, the most talented members of the group, anxious not to get a bad grade, started doing all the work for the group. The less talented ones learned fast they just had to show up and then sit back and let the others work. But by the end of the year, the talented ones stopped working hard, too. Why should the kids in the group who rarely participated, sometimes pretended to “not get it” and generally decided to play and do other things besides the projects be rewarded with the same grade as the kids who worked hard? Even a lesser grade no longer mattered to the talented kids who decided to “go on strike” against what they saw as their exploitation.
By the second year, it was obvious to even the district adminstration that this was a bust.
December 5, 2010, 5:27 pmSammy Finkelman says:
The problem of overvaluing IP property may occur in the real world when it comes to selling online content. Individual articles in a database, AND EVEN ACCESS, get sold for far too much. As a result nobody buys them, except maybe law firms, or when it is essentially free because it is included in something else.
This may occur because in fact, contrary to some of what has been said here, it is very difficult to charge 9 cents or 1 cent for anything, and it can only be done as part of some sort of subscription. The system first has to be set up.
In the beginning it wasn’t possible at all. Articles sold for easily more than the cost of the printed material and were bought as a last resort when someone already really knew what was in them and wanted a copy. People also in any case bought only a few.
I don’t think it’s the endowment effect that leads to overpricing. This is after all, a completely commercial transaction. There’s no emotional stake here. It is rather a kind of expected or hoped for profit effect. This does lead to sales at some point, except where someone cannot afford to sell below a certain level in which case prices do not drop until bankruptcy or foreclosure starts to have a significant effect..
Less than optimal, as opposed to no, sales, occurs when it is business hopes that delays market clearing, and it happens frequently where the marginal cost is low and the production cost in sunk or largely sunk. People always make bad decisions. A very common example is renting. Anybody with something to rent will get very stubborn about the price rather easily. It usually takes a long period of vacancy or loss of a tenant to get someone to set the right price.
The endowment effect on the other hand is when there is no market clearing at all. It is the same thing as the Duke University basketball ticket experiment discussed in Predictably Irrational: The Hidden Forces That Shape Our Decisions by Dan Ariely (2008) where there was a lottery to get tickets and he could not make a market in tickets – people wanted far more to miss the experience than they would pay to get it. The reason I think is simple – the seller is figuring out how much it is worth – the buyer compares it to all his money and can’t justify paying what it is worth..
,
About Coca Cola – the formula has no value at all. Blind taste tests proved in the 1980s that people really do not prefer it. That’s what led to New Coke. It is the brand name or the feeling that you are getting the same thing that you got before, that has value. A company producing something identical to Coca Cola as it was reformulated in 1920s I think, WITHOUT TELLING PEOPLE would not get too many sales.
December 5, 2010, 5:33 pmKirk Parker says:
Chris Travers,
“Intellectual Leasehold”. Interesting concept; say more.
sarconic_bob, you and A.C. are just dickering over the price.
December 5, 2010, 5:52 pmDan says:
As much as many prognosticators and so-called experts are saying President Obama is going to have a tough time getting re-elected, the reality of the situation is that President Obama will get re-elected against almost any potential GOP challenger.
However, one candidate cannot be over-looked. If we learned anything from 2008, we should’ve learned that organization and social media skills are paramount to a campaign. No one is actually going to “come out of nowhere”. To become the most powerful person in the world, you have to build quite an organization. That’s why only one person has a chance to beat President Obama in 2012.
This will make it all clear:
December 5, 2010, 6:50 pmhttp://mittromneycentral.com/2010/05/07/no-apology-song-the-case-for-american-greatness/
Greg Conen says:
The fact that many, many works of art were created before a copyright system existed would seem to say that the answer is yes. There were indeed people who created on a regular basis (eg, Shakespeare, Ovid). It may be that fewer works would be created, or different kinds of works, without IP protection, but the historical situation is hardly as harsh as you imply.
Of course, there are also ways to provide an incentive to creators without granting a monopoly on use. For example, assurance contracts, recently used successfully by Public Enemy.
December 5, 2010, 7:05 pmKen Arromdee says:
You’re begging the question. You’re saying “since it is property, what distinguishes it from tangible property?” but your statement that it is property at all is an assumption. Just because we call it property doesn’t make it property.
My guess is that you think it’s property because without the privilege, the “property owner” might make less money. But I’m sure you could think of many privileges which, if not respected, leads to loss of money but are not property.
December 5, 2010, 7:20 pmMalcolm Digest says:
OK. So we have this mechanism to duplicate a piece of intellectual property at near zero cost. In the absence of someone actually creating a work of IP there is nothing to put into the mechanism to create the abundance of duplicates of the IP. Seems to me that without the “brain labor” you have nothing. Nothing seems to be as scarce as you can get.
December 5, 2010, 7:26 pmKirk Parker says:
Malcolm, meet Greg:
December 5, 2010, 8:14 pmMLS says:
In a very general sense this statement has some merit, but it does not help the case of those who keep bringing up Shakespeare’s name in that the law we now know as copyright had its beginnings in England in the early to mid-1500′s.
Similar laws arose concurrently in other european countries, most notably Italy, France and Germany.
The likely catalyst? Mr. Guttenberg and his contemporaries, who were then working on what was the “Betamax” of its day.
December 5, 2010, 8:54 pmBen P says:
Do we have to have another “Star Trek TNG was communist” thread?
It’s the same situation, if you have a device that can manufacture any conceivable substance from cheap and available energy and whatever raw materials happen to be available, scarcity virtually goes away. The cost is no longer the limiting factor.
December 5, 2010, 8:58 pmMLS says:
Absolutely. The cost of reproduction/manufacture goes to near zero, and much the same is the case concerning distribution, for “digital” goods. Unfortunately, what is left out of this is that the cost to create the goods seldom does likewise, and therein lies the rub.
December 5, 2010, 9:14 pmGreg Conen says:
Those first “copyright” laws were intended at least as much to suppress printed dissent as to protect authors. I could have mentioned Milton, instead of Shakespeare, who wrote AGAINST the Licensing Order of 1643.
December 5, 2010, 9:35 pmRandy says:
ChrisTS: ” I’m often astonished by the prices unknown artists and artisans charge for their work, even on a generous estimate of the supplies and work that must have been involved.”
A former gallery owner once told me that cheaply priced art sold well because it is, well, affordable. High priced art sold well because people thought that he must be worth something to be priced so well. Mid-price art didn’t sell at all. So she divided all her clients into low priced and high priced art and sold it very well.
Greg: “Those first “copyright” laws were intended at least as much to suppress printed dissent as to protect authors.”
Sure, in the 18th and early 19th century, there were copyright laws in Europe, but there will of little value. Composers such as Mozart, Beethovan and Chopin wrote their music and sold it to a publisher for a lump sum payment. They received no royalties of any kind. Publishers made money of course, but there was also plenty of pirating going on, and composers “borrowed”, edited or transcribed the works of others all the time. If Lizst had to pay royalties or make some sort of payment, he would never have been able to transcribe operatic arias or Schubert’s lieder for the piano.
December 5, 2010, 11:29 pmGreg Conen says:
@Randy:
December 5, 2010, 11:40 pmI’m not sure if you think I disagree with you, but I don’t. That’s pretty much exactly my point: historically, much creative (and scientific) work was done without anything like the IP rights we have today.
Malcolm Digest says:
This is the point I was attempting to make. Created products and goods have basically two steps in becoming available. The first is the design and development of the product. What is it? What are it’s properties? The second phase is the actual manufacturing and delivery of the product. Even a product with a manufacturing cost of $0.01 must first be developed. Without that development the product won’t exist and regardless of the low cost of manufacturing you still have to have the idea, design, development and investment to bring the product to the end user.
I’ve seen it mentioned in multiple places lately that IP is not scarce because it’s easy and relatively inexpensive to make many, many duplicates. The only thing I was pointing out is that, regardless of ease of duplication, you must first have the original item and that original item can be very expensive and difficult to produce. In other words, IP is scarce.
December 6, 2010, 12:14 amAnonymous Coward says:
You are defining the scenario to reach the result you want. Example: “someone will do so on a regular basis when free-riders profit from it, not the creator” implies that “free riders” benefiting necessitates that the creator does not. It can be both. There are billions of “free riders” who aren’t paying anything to Edison’s company even though they use light bulbs, because the patents have expired. The “free riders” didn’t stop him inventing it or profiting from it, and patents were 14 years then instead of 20. It is perfectly possible to have weaker patent and copyright laws without stopping people from creating things.
December 6, 2010, 12:42 amAnd it’s all a balancing act. It is a known phenomenon that when a groundbreaking new technology is invented, you get a whole slew of improvements shortly after the original patents expire and the rest of the world gets a shot at making it better. In the meantime the original inventor is the only one with a major incentive to make improvements, since anyone else would have to negotiate and split the profits from their efforts with someone else, which slows down progress in the field. And the same goes for copyright: There is a reason we see so many derivative works of Shakespeare and it’s not because the copyright holder is out there promoting it.
Anonymous Coward says:
I find it odd that you’re making the distinction and then ignoring it. Producing the first copy is hard, after that it isn’t scarce.
Take the example of two companies who each spend ten million dollars to develop competing intellectual products which turn out to be rough substitutes for one another. The first company realizes that the second company did a much better job designing their product. If they don’t severely undercut the other company on price they won’t sell anything at all so they end up provoking a price war and both companies end up charging a pittance because it’s better to make back ten cents on the dollar than surrendering the market to the other guy and getting nothing.
It’s because there was never any scarcity to begin with. Imagine the alternative where the first company offers to sell their IP to the second company so that the second company can have a monopoly (notwithstanding antitrust laws). All that does is give one party a monopoly so they can charge monopoly prices, which is the same thing copyright is doing: It’s monopoly, not scarcity.
And the reason people insist on the distinction is that artificial scarcity is inefficient. If the copyright holder is charging $10/instance because there are 50 million people who will pay that much, but there are a hundred million more people to whom it is worth no more than $1/instance, then all of those people lose out on the benefit of having the work without any corresponding benefit to the copyright holder.
December 6, 2010, 1:00 amDavid Schwartz says:
This requires two assumptions to be true. One is that human desire itself be subjective. The other is that there be no units in which an object can be objectively measured that reasonably can be described as value.
However, neither of these things are the case.
The former is not true because humans desire things that further their ability to remain alive such as food, shelter, and clothing. To a call a starving person’s preference for rice over mud “subjective” is bizarre.
The latter is not true because value can be measured in objective terms. For example, how much rice you can trade a book for is something that can be objectively measured. That a large number of subjective preferences may create the market in which the measurement is made does not make the measurement subjective. Otherwise, everything is subjective since we live in a world that results from a number of subjective actions and preferences. If everything is subjective, then this claim is empty and doesn’t separate value from anything else.
Is the weight of my car subjective? After all, I picked the car that I felt like buying. Of course not. I have the car I have, and given that, it’s weight is an objective property of the world. The same is true for value. We have the world we have, and the value of things is an objective property of that world.
December 6, 2010, 1:20 amJustin Levine says:
Malcom Digest: “[R]egardless of ease of duplication, you must first have the original item and that original item can be very expensive and difficult to produce. In other words, IP is scarce.”
Sorry, but your conclusion doesn’t follow your argument at all. The fact that a creative work can be very expensive and difficult to produce does not in any way make IP “scarce”. To suggest so is simply a flat-out distortion of the English language.
What it DOES suggest is that some form of incentive might be needed to encourage certain creative works OUTSIDE of the free market system – hence, the legitimate argument for some form of a copyright regime in order for government to create an artificial scarcity that otherwise wouldn’t exist. However, copyright supporters still need to come to grips with the following truths:
1. All copyright regimes are created and dictated by government fiat and power – it has NOTHING to do with free market principles and it is a fool’s errand to try and price items based on them (which is why many “conservatives” are fooling themselves when they erroneously try to compare it to real property which is scarce and rivalrous by nature). Unlike rivalrous property, there is no “invisible hand” at work with IP (except perhaps to the extent that copying/’pirating’ is a natural human impulse that copyright copyright regimes try to stifle). To try and justify copyright based on “free markets” or “natural rights” is a complete non-starter based on entirely false principles.
2. If the goal is to maximize both the creation and distribution of new works, then it stands to reason that any copyright regime should be the least intrusive possible in order to provide the incentive to bring the original creation into existence. No rational person can conclude that this is what we currently have.
December 6, 2010, 2:33 amdevils advocate says:
forgetting the censorial aspects of early english copywright the model to which you refer is the patronage system. For Ovid it was Marcus Valerius Messalla Corvinus. Shakespeare relied on a more disparate patronage of the theatre(although backers of productions seem a cross between artistic patrons and hollywood producers, see the producer in Shakespeare in Love – favorite movie – who gets a bit part thrown in). In this sense his writings were like trade secrets until presented.
Nowadays private patrons generally have entered the IP markets although we still have the NEA which maybe blurs the lines of the patronage model and the mandated licensing that opponents of copyright and patent trolling and the like have proposed.
I haven’t read Kinsella, but a strong and effective opponent of IP who makes a great read even if he hasn’t convinced me is Tom Palmer at CATO. I think that the IP area is one that demonstrates a significant divide between natural rights and utilitarian philosophy. Utilitarians are only libertarian to the extent that lassez faire will effect the greatest good for the greatest number.
Now that is not an unprincipled position, self-evidently.And, with regards to the general defense of free enterprise undergirded by individual rights, the defense for at least a natural rights foundation as of continuing merit for western civilization in opposition to those promoting a more egalitarian outcome based approach is that the individual rights model has actually provided the greater good in practice. so that is a utilitarian defense of natural rights.
I’m sure I have more to learn about IP, but I come down on the side of the property model. I wrestle with the leasehold issue and the question of how long copywright should be. And my personal gut belief is that the biggest issue with the patent system is its use as a threshold for entry into markets against obvious innovations that shouldn’t have been patentable under the obviousness tenet. See ‘One-Click ordering’ and Peanut Butter and jelly sandwiches without crusts and the edges seal with a fork. My mother ‘invented’ those years ago, and I suspect so have many others.
I think some action to ease the transition to the public domain of the copywrights with absent or inapparent owners, somewhat akin to adverse possession might be appropriate. I’m not sure I’m that worried if Disney owns Mickey forever. I think the fair use doctrine allows for a measure of derivative commentary. It may be that the longer copywrights get the larger should be the fair use domain, I’m open to discussion.
I haven’t thought as much about the patent trolling issue, but I think it probably has economic answers short of a maor shift in the government side treatment.
Brian
Brian
December 6, 2010, 8:00 amjlowery says:
I think there’s a difference between IP as artistic creation (poems, paintings, and other “high” art) and IP as commodity (software, pop songs, mystery novels, video games, and other creations that are designed to feel some definite need or fungible space).
Heavily commoditized IP tends to have a well-defined price. Companies know how much they’re paying someone to make software, and pop music, novels, and video games all go for the same price that’s fairly well calibrated to what the market is willing to pay for that level of entertainment. And I don’t think there’s any danger that there are many transactions of this IP going unmet.
High art that’s meant to appeal more to the aesthetic in some ways can be said be filling a “need”, but I think it’s less well-defined, and more emphasis is put on the artist and him wanting to create than on the consumer of the art. Thus for multiple reasons the market is skewed.
However, overall I’d say the IP market is doing fairly well, since I don’t think many would say the market for paintings or poems is integral to our modern IP system.
December 6, 2010, 9:41 amMalcolm Digest says:
I disagree. Given that, individually, we don’t want to have our musical library be 100 identical duplications of a particular symphony, each individual work is equally scarce. It doesn’t matter that you can trivially produce another identical copy of something you already have since what you want is a variety of items. And for each new item, there are zero of them until someone creates them. Anyone who exclusively focuses on the reproduction aspect of this discussion will never accept what I am saying. But the reality is is that until each work is created there are zero of that work. Which is scarce by any definition. And unlike pecans, IP doesn’t grow on trees.
December 6, 2010, 10:36 amAnonymous Coward says:
The distinction you are making is between originals and copies. Originals are scarce. Copies are not.
I like ice cream. If someone made a machine that could mass-produce ice cream for no money, so that ice cream is free from here out for everyone, I would still want to eat things other than ice cream for the same reason that people don’t want a hundred copies of the same music. That doesn’t mean ice cream is scarce. It just means it isn’t a substitute for all food.
Compare this to what happens if someone made a machine that could mass-produce any kind of food for no money. Then you could have 100 different kinds of food but none of them would be scarce. This is the closest analog we have to today’s technology with respect to copyright.
Now you say that new works are scarce. Well, of course they are, but only until a copy falls into the hands of someone willing and able to make more copies for free. The only way to make copies scarce is by action of law in violation of human nature. Which is what we try to do, although lately it hasn’t been very successful.
December 6, 2010, 12:21 pmpcrh says:
Actually, IP scarcity depends on willingness and ability to create it. IP laws don’t create scarcity where there was once bounty. They incent creation to begin with. There will of course be people who make art for their own pleasure. But when we talk about patents, most people don’t have the means to experiment and invent without some promise of return on investment.
December 6, 2010, 12:51 pmChris Travers says:
Our Constitution permits Congress to secure, for limited times, exclusive rights by artists and inventors for their inventions and art. Ok, that’s a paraphrase except the limited times part.
A way I’d look at it might be to try to devise a parallel case regarding real estate. So I own a piece of property. Suppose I lease it out to someone else, where I retain only a few rights (maintenance, etc) and the third party secures, for a limited time, exclusive rights to the premises.
This is very close to the way copyright actually works. A work is created and brought to the public. We may now say that the public “owns” that intellectual property, but in exchange for being brought this work, gives certain rights over the artwork back to the creator for a limited time. The artist now owns a leasehold over the property.
This is close to the way you’d look at it accounting-wise also. A leasehold which is paid in full at the beginning is an asset (i.e. property) which is depreciated so that it loses all value when the rights lapse.
So the question of copyright policy then becomes a question not of the ownership that the artist has over the work, but rather the leasehold that we, as the public, wish to offer back to the artist in exchange for the work becoming public. I believe that looking at copyright in this way returns the copyright debate to the perspective that is largely mandated in the Constitution.
Note however that some other countries have a “fruits of labor” view of copyright which is absent in the US. In the fruits of labor view, copyright is more like property than like a leasehold.
I suppose I’d concede however, that trademarks would still be intellectual property and not intellectual leaseholds since they are held until abandoned or invalidated.
December 6, 2010, 12:56 pmpcrh says:
I disagree. If you patent an idea, and I invent an improvement on your idea, I have every incentive to patent my improvement because people will want to use both your idea and my improvement on your idea. In such a case, I would be able to collect royalties from people who practice my improvement, and it would cost me nothing. Your patent on the original idea doesn’t preclude me generating value from improving on your idea.
December 6, 2010, 12:58 pmpcrh says:
Interesting, though I disagree that this would take us closer to original constitutional views on IP. Your view would presume that the fruit of your intellectual labor does not to belong to you, but rather to people who had nothing to do with its creation. That has no basis in the Constitution. In fact, I would argue it is contrary–the Constitution refers to a person’s works as their own. They only get monopoly rights for a limited time, but the basic idea is that your labor is yours, not the public’s.
How would your “intellectual leasehold” change policy on IP? By making it more justifiable to limit the monopoly?
December 6, 2010, 1:19 pmChris Travers says:
Well, what copyright law does is change the incentives. It reduces incentives for incremental creation and increases the incentives for creation from whole cloth.
In a world without copyright law, you’d still see works of art created and performed, but you’d have a more conservative tradition of such art. The tradition involves copying and modifying existing works (f. ex. the tradition of the epic singer). This conservative approach to art has exact parallels in the open source software world today. This doesn’t mean that innovation doesn’t happen, but that innovation happens in a methodologically conservative manner, which is different than, say, it happens at Microsoft.
I’d suggest folks who are interested in what this sort of thing would look like might want to read “The Singer of Tales” by Albert Lord.
December 6, 2010, 1:25 pmUrso says:
With this I disagree. Trademarks are often lumped in with copyrights and patent, but I think this is a fundamental mistake. Trademarks are not listed in the constitution – the Lanham Act is enacted under the commerce clause. This is why you are technically required to show that a mark has been used in interstate commerce before you are qualified to federal registry. (This has been statutorily altered so that all that’s required for the initial registration is “intent” to use in commerce, although your mark will be cancelled if you don’t eventually use the mark in interstate commerce within a certain amount of time).
Why isn’t trademark listed in the IP clause?Because trademark does not arise from the same tradition as copyright and patent; it arises from rules of consumer protection. The sole question in any Lanham Act case is whether the mark is being used to identify a good or service in such a way that a reasonable consumer, on looking at the allegedly infringing mark, is likely to become confused regarding the source of the infringing good or service.
It is truly unfortunate that the gravamen of trademark has shifted from this original concept. Now trademarks are considered valuable property in and of themselves, not only as a source signifier but as some independent asset separated from the good or service it identifies. The end result of this (so far) is the odious dilution statute, which basically gives big multinational corporations the right to forbid other people from using any mark that even seems sort of like their mark, for any purpose, whether or not any reasonable consumer could ever be confused.
December 6, 2010, 2:10 pmChris Travers says:
The Constitution conditions patent/copyright clause with a statement that this is to further the sciences and useful arts. This moves the perspective from a fruits of labor view to an incentivizing view.
December 6, 2010, 2:13 pmChris Travers says:
Even here, you could argue that a trademark in this way is analogous to a city lot. It has value in itself, but at least in rural places where I live, is FAR more valuable when improved with buildings and functions conducive to civilized life.
December 6, 2010, 2:25 pmpcrh says:
Bad word choice on my part, since “fruit of labor” is one possible justification for IP protection. I didn’t mean to use it in that sense. I only meant to distinguish between who “owns” what–is your idea yours, which you donate to the public? Or does the idea you have belong to the public, which grants you a temporary monopoly/lease. Personally, I prefer the former.
December 6, 2010, 2:33 pmChris Travers says:
But the former has a number of nasty effects which are actually prevented by existing copyright law in this country. For example, mere collections facts, organized in practical ways (for example the white pages of a phone directory) are not subject to copyright protections, but they would be in a fruits-of-labor regime. If I want to copy the whitepages, I am free to do so, because the phone directory company has no claim to ownership over the fruits over their labor in the absence of expressive content. Similarly a purely practical piece of software (for example of a game console’s input/output hardware interface system, as in Sony v. Connectix, which held that reverse engineering of a game console’s BIOS was fair use, even if it involved literal copying and reverse compiling) is given weaker protections than a novel or a movie.
Similarly the idea of fair use is based entirely on the idea that the public owns the work as a whole. The idea here is that the public, the outright owners of the work, retains some limited uses to the work even after granting this leasehold back to the author.
December 6, 2010, 3:44 pmpcrh says:
By “former” I was referring to the idea that individuals own their ideas/artwork, not the public.
Where do you get this idea? Fair use is pretty narrowly circumscribed, and mostly limited to allowing copying so that a copyrighted work can be commented on or discussed without infringement. I do not see any support for the idea that Fair Use is “based entirely on the idea that the public owns the work as a whole”.
Without IP laws, no one would own the intellectual property embodied in works of art or technological devices. People would own the chattels themselves only, but not the concepts or ideas–the innovation–which could be copied by anyone. That doesn’t mean the public owns it. It means no one does. The Constitution grants ownership to the creator. (It even says, “by securing for limited
Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”.)
I disagree with the leasehold view, mainly because it means inventors/artists don’t own what they create. Why should the public own the widget you invented, or the book you wrote?
December 6, 2010, 4:14 pmAnonymous Coward says:
It isn’t that you wouldn’t patent your improvement, it’s that you wouldn’t make the improvement. If you have to negotiate with the original inventor, that at a minimum increases transaction costs which cut into your prospective benefit. On top of that, the original inventor will want a cut, and has the ability to hold up your improvement entirely, even if the cut they want is completely out of proportion to the contribution the original invention made to the improvement. You easily run into problems where it costs a billion dollars to develop an improvement and the improvement is expected to generate two billion dollars in royalties but the original inventor is demanding a 50% cut, thereby denying any incentive to invent to the prospective improver.
It does if the original inventor withholds permission to practice the improvement unless they receive so enough of the possible royalties that the prospective inventor of the improvement has an insufficient incentive to invent.
No one owns the “concepts or ideas” even now. Copyright has the idea/expression dichotomy and “laws of nature, physical phenomena and abstract ideas” are not patentable subject matter.
Why should you own it? You built it on the backs of everyone who came before you. If you invent a microprocessor, great, but someone else invented a transistor, a diode, various basic logic gates, printed circuit boards, processor sockets, switching power supplies, voltage regulators, etc. etc. and without those your processor doesn’t exist. Half of that stuff was invented a hundred years ago. If you go back further you get conductive electrical wires and the like. There is no principled reason outside of social utility why you should have rights over your invention any more than the descendants of Tesla and Morse and Franklin.
December 6, 2010, 9:44 pmdevils advocate says:
You’ve obviously been missing some great episodes of “punkin’ chunkin”
Brian
December 7, 2010, 6:49 amAlpheus says:
It isn’t the copying of ideas that make them non-scarce–although that would contribute to their economic non-scarcity–but it’s that they exist independently from the natural world, in their own expansive world of ideas. This world can be explored by any being that is capable of thinking.
This is most obvious in mathematics and engineering, where axioms, laws of physics, and logic constrain thinking: it isn’t uncommon for two people to independently come up with the same idea. But, to a lesser extent, it’s even true with art, literature, and music, because any person can memorize a piece of work–indeed, people with photographic memory have no choice but to memorize a piece of work, when they encounter it.
It’s this, more than anything else, that makes so-called “Intellectual Property” non-scarce. It’s also why I oppose copyrights and patents.
December 7, 2010, 11:09 amAlpheus says:
There’s an open-source recipe for cola–have you seen it? It has all sorts of exotic, hard-to-get, potentially dangerous ingredients; additionally, it takes special effort to get it into a can. (The recipe has been canned before.)
(And yes, the ingredients, in the concentrations described, are dangerous: the recipe warns not to let the drops of oils to get on your skin, not to inhale the caffeine powder that is ground to put in the drink, and not to put too much caffeine in the drink, among other things.)
When we by a can, or a bottle, of Coke, we are purchasing much more than the results of a recipe. We’re purchasing a can, the labor to acquire the ingredients and put them together, the marketing that produced those lovable advertisements, and perhaps even a drink that we enjoy. We can make our own drink–and people have done so–but most of the time, we’d rather not go into all that effort!
December 7, 2010, 2:48 pmpcrh says:
You don’t have to negotiate with the original inventor to make an improvement. And assuming people in the market were interested enough to pay for the original idea, they will also want to pay for the improvement. Licenses for this kind of thing are given all the time. It is common practice. Why? Because both sides (the original inventor and the one who improved on it) make money on the deal. Your assumptions about the original inventor’s behavior (wanting to charge so much for the license that no one can afford it) don’t make sense to me.
With respect, this is incorrect. You can’t copyright an idea, but you can patent one. That is how intellectual property differs from real property. Real property covers physical objects–I own that fork. Intellectual property covers a concept or idea embodied in an object, but doesn’t give ownership of the object itself.
The descendants of Tesla et al. do own the rights to their progenitors’ inventions, if the invention was patented and if the inventors die before the patent expires.
I personally subscribe to the idea that my labor is my own, and my ideas are my own. You seem to believe (and I am not trying to mischaracterize your post) that your ideas (and your work, too?) should belong to the public. I can’t agree to that type of collectivism. If you can’t, in your own mind, justify why your own idea should belong to you, how can you justify private property of any kind? After all, if you labor in a farm to grow wheat, why should it be yours? You didn’t create the DNA in the seeds that cause them to grow into a plant. You didn’t provide the sunlight. You provided less toward the end product (bread) than an inventor does toward his idea (which he at least came up with by himself, even given that virtually all inventions are mere improvements). If you don’t buy this (or similar) reasoning, how do you justify private property at all?
December 7, 2010, 3:13 pmpcrh says:
The fact that ideas can be had by two different people doesn’t make any given idea non-scarce. Each individual idea is still pretty scarce. If they weren’t, then we’d advance as a society much more quickly than we have, because innovation would be common–everyone would be able to invent the next improvement to transistors, for example. As it happens, very few people are capable of valuable innovation.
December 7, 2010, 3:21 pmAlpheus says:
Ideas are still non-scarce in a way that physical goods aren’t: anyone capable of absorbing an idea can do so, independent of other people. Patents–and, to a lesser extent, copyright–interfere with the fact that two individuals can come up with the same idea independently.
When talking about patents, there’s all this talk about “We need to protect the person who comes up with the idea!” Well, Gray came up with the idea of a telephone, and did so independently of Bell…yet it was Bell who got the patent, and because he got that patent, all of Gray’s work was made null and void. Why was Bell’s work more important to preserve that Gray’s?
Or consider Tesla, the inventor of the radio? Oh, wait, it was Marconi who got the patent, despite the hard work and effort that Tesla and others put into the idea…at least, until the Feds didn’t want to pay Marconi royalties for use of the radio during WWI. Then Tesla was granted the patent, although he had already been dead for several months when he received it.
Yeah, patents do a very good job of protecting individual work…
It’s ridiculous to say that ideas are hard to come by: some are, some aren’t. It’s also ridiculous to say that all ideas are equally protectable, even if they are initially “non-obvious”: some ideas are so simple, that once you see it, you could easily duplicate it. I even question the claim that it’s easy to duplicate ideas: how many of us can explain Einstein’s Theory of Relativity–or even something simpler, like Newtonian Mechanics, or the mechanics of calculus? It’s one thing to own a textbook that contains these ideas; you don’t own the idea, though, until you fully understand it yourself.
I would confess that I’m biased: My experience with ideas is in mathematics–an area in which the patenting of ideas is expressly forbidden, and in which even copyright doesn’t afford much protection–yet, my field still advances, despite of the lack of these protections. It’s not as if these ideas are easy to come by, either; just consider Andrew Wiles’ proof of Fermat’s Last Theorem, as an example.
December 8, 2010, 11:39 amMLS says:
For the sake of accuracy, patent law at the present time is based upon the “First to Invent”, and not the “First to File” (as is the general rule elsewhere. While concurrent invention by two parties does arise on occasion with respect to persons seeking protection for their inventions under patent law, a feature of US patent law that has existed almost since the inception of the first patent act is what is know as an interference proceeding, during the course of which the first inventor entitled to a patent is identified.
In stark contrast, copyright law permits the grant of copyright to two or more authors who have independently created their respective works.
December 9, 2010, 11:07 ampcrh says:
I agree–ideas can be enjoyed by people without “consuming” them. But that benefit is also creates the free rider effect. I can invest time and money to come up with a patentable invention, and someone else can manufacture/sell the invention (once they’ve learned it) without sinking the R&D cost. A system without patents tends to penalize the productive and reward free riders. (Not in all cases, and it is easy to find counter examples, as you have shown. But in all, the benefits of patents seem, to me, to outweigh the downsides.)
Overall, I think the study that spawned this discussion is aimed at justifying a system of compulsory licensing–even if I have a patent, I have to license it to anyone who wants to use it. That isn’t a terrible system (it is better than having no patent system at all). But I think the problem the study points to is not so much of a real problem. Maybe their experiments show people have bias toward keeping their own property as opposed to selling, which may reduce mobility of patent licenses as goods. But I think the study also conflated lots of ideas–the parts that I read (not the whole thing, admittedly) didn’t distinguish between actually selling a patent (or other IP) versus licensing the IP. Some of their assumptions in their experiment seemed to refer to licensing, while others seemed more like outright sale, while others were just confusing (statements like “you get to keep your poem after you sell it”–what does that mean, if I’ve “sold” the rights to profit from the poem to someone else?)
Even if people are biased toward not selling, so what? Does that mean the government should step in? Is there a real problem with lack of transfer of IP in the US, or lack of licensing? Maybe there is, but this study doesn’t prove it to me. And if there is a problem, do we rely on government to set a fairer price than individuals in the market?
December 9, 2010, 11:33 am