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).