Saturday, August 14, 2010

Jeff Tucker on Intellectual Property and Research

Jeff Tucker has a really great post on intellectual property and a report in the New York Times about advances made in Alzheimer’s research from sharing data.

I agree, and I’m very intrigued by this economics of information/intellectual property literature which honestly I don’t know much about. Anyone who has ever done research knows the benefit of freely sharing ideas. This all makes intuitive sense.

The question, though, is why do we have intellectual property if information is so resistant to standard property rights logic? How did failing to share information and ideas come about in the first place?

Well, because it’s costly for one thing. Even if I were an a priorist economist I’d still have to feed myself – I would still need my labor effort provided for. Even these sorts of theoreticians need books to draw from. When you get into empirical research the costs increase even more with data collection and computing power that’s required. Any final version of an idea requires editing and review, and quite possibly the costs of publication. It costs the Urban Institute millions of dollars to do random assignment, experimental research on federal programs and we’re a non-profit – that’s just the cost of the inputs for developing the information.

Now, when the government pays us to provide them with information I suppose the idea is our costs are covered for the benefit they receive and then the information can be shared after that. But that still introduces something of a free rider problem. If you were a pharmaceutical company, for example, why would you even contract for data collection in the first place if you knew that it would be shared after your paid for the costs of the data? Why wouldn’t you just wait for someone else to pay for your data and then reap the benefits of sharing it? Tucker quotes Jefferson on this, which highlights what I consider to be the nub of the problem:

“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. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property.”

Jefferson gets at the heart of the problem with freely shared information. He compares it to the air – in other words, there are externalities here. We have internalized costs of developing knowledge but the benefits are externalized because by their very nature they resist being penned in by property rights – just like air. Internalized costs and externalized benefits means too little will be produced (just like with air pollution internalized benefits and externalized costs means too much will be produced).

So – we have an excellent case for free information here, but a fundamental externality problem. Which of course sets us up for an insight that has been expounded upon countless times before: the state or some other institution not motivated by profit opportunities has an important role to play in promoting the development of knowledge. The market mechanism breaks down here – you cannot say that “well if nobody was studying it that must mean nobody really wants the knowledge”. That argument simply doesn’t hold water for anyone that knows anything about the market mechanism.

Now, I’m sure Jeff Tucker and I will part ways on the role of the state in all this, but I would note that our differences would be derived from our political philosophy, not from our economics. I think he highlights some key points in his post. I also would probably part ways from him insofar as I’m not too critical of some minimal intellectual property rights – it's not exactly something that keeps me up at night, and if they're minimal I don't see how they could be too disruptive and they might alleviate some of the externality problem. But I would agree that they shouldn’t be as strict and they shouldn’t be regularly renewed like we often see. It's like property rights for pollution or any other externality - if you can get it to act like property to a certain extent you'll probably improve the outcome, but you shouldn't go too far with it because these sorts of externalities are very hard to conform to a property rights regime. One very easy step would be to make all government funded research entirely public (this may already be the case – I’m not sure).


  1. I have not yet read Kinsella's book, which provides the theory behind the New Misesian view on IP, but it seems to me that the problem stems from an inadequate definition of property rights. Kinsella tries to differentiate tangible, material property and intellectual property. Ultimately, I think this is an exercise in futility.

    Let's, for simplicity, assume there is no state (or state intervention, or whatever).

    Like I've written before, I believe that property rights came about as a method by which to allow individuals to better reach certain self-serving ends. If there was a conflict in property, then this would be an obstacle to fulfilling those ends.

    There is no reason that "intellectual property" would fall under the same process of creation. There are clearly people who enjoy protecting their ideas (otherwise, there would be no intellectual property). If people can find forms, outside of coerced monopoly, of doing so, then what's the problem?

  2. "'s not exactly something that keeps me up at night..."

    It should. Read here further:

    "...the state or some other institution not motivated by profit opportunities has an important role to play in promoting the development of knowledge."

    This is of course where your entire argument breaks down. The "state" (or rather, the individuals who make up the government) is in fact interested in all manner of profit opportunities. Human beings who work within the "state" are just like human beings who work outside the state.

  3. from your link:"A clandestine international treaty is currently being negotiated among parties including the United States, Canada, New Zealand, the European Union, Japan, Singapore, and Morocco. It can justly be called the greatest threat of our time to the advancement of human civilization."

    How clandestine can it be if it gets reported on Don't editors there check for word choice?

  4. "This is of course where your entire argument breaks down. The "state" (or rather, the individuals who make up the government) is in fact interested in all manner of profit opportunities. Human beings who work within the "state" are just like human beings who work outside the state."

    Well of course they're the same. What does that matter? Haven't you ever heard of non-profit institutions. Everybody is motivated by seeking things which make them happy - is that what you mean? That's not the same as saying that everyone is motivated to earn money by selling something in a market for more than it cost them to produce it. That's profit. Everyone is motivated to maximize utility. Certain social institutions and their owners are motivated to maximize profits and they use utility maximizers as employees. Many other social institutions are not motivated to maximize profits and they also use utility maximizers as employees.

    What breaks down here Xenophon? Don't confuse "profit" with "any positive thing that someone could want". Profits are a specific kind of "positive thing" derived from a certain kind of market exchange.

  5. Daniel,

    "How clandestine can it be if it gets reported on"

    Merely because an effort is clandestine, does not mean it cannot be exposed. In this instance ACTA was exposed by Wikileaks as I recall, not because the governments in question were publishing the results of their efforts so far.

    As for your profit comment, it is a completely artificial and useless way of looking at human behavior. The word profit as I describe it falls well within the four corners of its use found in the OED.

  6. Use whatever words you like, but that renders it useless for talking about market processes. It's not how I'm going to be using the word here and it's not how I used the word in my quote.

    If you're going to use a different definition than the definition I used in my quote, then your refutation of my quote isn't going to be much of a refutation.

    Profit is the excess of monetary revenue over monetary costs. If we want to talk about utility or happiness that's another discussion.

  7. *let me revise that to revenue over costs. not sure if that's necessary to do or not, but I just don't want to downplay the importance of opportunity costs accidentally.

  8. Profit is just another way of describing the seeking of advantage ... the pursuit of such is no more common outside government as it is inside government.

  9. As I said - if you want to use it that way, you have to understand that that is not the way people will be using it on here. And you can't respond to one use of the word with a criticism derived from another use of the word.

    All profit seeking is advantage seeking, but not all advantage seeking is profit seeking. If you're going to respond to the point coherently you have to recognize that.

  10. Well, that's fine, and I understand your point.

    I believe the main problem with the granting of monopoly power by the state is that it is inherently corrupting. There may be benefits to such, but they seem to be far outweighed by the problems we've seen arise (particularly in the last couple of decades).


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