Wednesday, June 19, 2002

excludability and rivalrousness Send this entry to: Spurl Ma.gnolia Digg Newsvine Reddit

excludability and rivalrousness When last I wrote about patents, I never responded to a comment asking what I meant by "overincent." While I was figuring out just what to say, Forbes came out with a nice piece arguing, "Too many patents are just as bad for society as too few."
The undisciplined proliferation of patent grants puts vast sectors of the economy off-limits to competition, without any corresponding benefit to the public.
For instance, check out this description of a meeting between Sun and IBM, which descends into IP thuggery:
Finally, the chief suit responded. "OK," he said, "maybe you don't infringe these seven patents. But we have 10,000 U.S. patents. Do you really want us to go back to Armonk [IBM headquarters in New York] and find seven patents you do infringe? Or do you want to make this easy and just pay us $20 million?"
A strong patent system encourages diversion of resources into rent-seeking -- accumulating large portfolios of patents and demanding money from anyone who seems to be violating them. But it's tough to argue that this process encourages innovation. In many ways it discourages it. This may not bother you. But I need a lot of convincing before I decide it's a good idea to grant someone monopoly powers. And while I'm not a huge Larry Lessig fan, I like one of the points he makes in this Reason interview:
Intellectual property deals with the problem of non-excludability by saying, We’re going to give a government-backed monopoly right for a limited term to assure there is enough incentive for people to produce. But it shouldn’t be expanded so broadly as to create a false protection for rivalrousness.
But unlike Lessig, I don't believe that grants of monopoly are necessary to solve the "non-excludability" problem. My opposition to intellectual property rests on my beliefs that there are market solutions to non-excludability and that artificial rivalrousness is a costly bad. (Lessig would likely agree with the second but not the first; John Perry Barlow would probably agree with both.) Right now you don't see too many market solutions -- but that's in large part because it's much easier to get a patent or copyright from the government, so no one has bothered to work out a monopoly-less business model. I call this rationale for IP The Argument from Prosaicness: "I can't imagine how creators of "intellectual property" would make money without IP laws; therefore, IP laws are necessary for creators of "intellectual property" to make money." I don't claim to have all the solutions. (Only some.) But insofar as prosaicness dominates, no one is even looking for the solutions. Still to come -- my #1 research project: market solutions to non-excludability.

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