Re: ECON: Intellectual Property Again

Michael Lorrey (
Thu, 21 May 1998 18:53:56 -0400

Daniel Fabulich wrote:

> On Wed, 20 May 1998, Michael Lorrey wrote:
> > But they wouldn't be getting paid fairly for it. This is about as logical as a
> > manufacturer only getting paid for some of the product he makes, i.e. not somthing
> > which should be legislated or forced on someone. Product for which a manufacturer
> > is not paid, and which he does not willingly donate to charity or give away is
> <irony>Durrh. Huh?</irony>
> Information is not a product, nor can it be treated as same. The
> provision of information is a service, not a sale of consumable goods.
> Your position is like saying that if I light a fire, and then sell you
> some, and then you give/sell fire to your friends, you've stolen my fire.

Information can certainly be treated as any other product. Since information cannot exist
in nothingness, it needs to be represented in an arrangement of printed letters, or
electrons, or sound waves, then it certainly has material existence and is therefore a

A service is work, a kinetic, not a static state. Information is static like any other
product. Transmitting information is doing work as it is a kinetic action, expending
energy to do work, so the act of transmission is a service, and the act of agreeing to
lend someone the use of my information for specific purposes on the condition that you do
not reproduce my information to sell to others is also a service. The information which
is lent is still a product.

Moreover, service, or work, is the ultimate property right, unless you beleive in
slavery. Only a slave does not have sole right to his or her own labor. An individual
cannot have his or her work stolen from them. Intellectual property rights protect the
product of that work, whether it is a statue, a song, a building, a machine, or anything
else which is the result of man applying his or her intelligence to add value to

> Similarly, your argument that intellectual property is stolen when copied
> is valid but unsound; as you should already realize, I am opposed to the
> premise that the right of other people to make copies of a piece of
> information could be lawfully owned. Also, with respect to coercion, if
> there were no intellectual prpoerty rights, then an inventor who knew this
> and created a product anyway must necessarily be aware of the fact that
> his transaction has positive externalities. If the inventor created
> anyway, then the action is voluntary; the inventor accepts the fact that
> other people would benefit from his/her work. This is simply stating the
> trivial fact that if there were no property, there would be no "theft," in
> the technical sense. This is not a valid reason to eliminate property,
> however. Indeed, I maintain that we should enforce property rights in
> such a way as to maximize economic efficiency. For example, take a look
> at:

> 43.html
> Which is chapter 43 of David Friednman's _Machinery of Freedom_, arguing
> for the enforcement of only economically efficient property rights. I
> intend to argue that intellectual property rights are NOT economically
> efficent, and for that reason should not be enforced as law.

I understand your logic, and beleive that you are wrong in your economic evaluation.
Without a protect of an inventors intellectual property rights, there will not be the
same level of invention as there is when there are such protections. The human race is
desperately dependent on advancing technology from invention that is stimulated by
intellectual property rights incentives, only because we are stuck on one planet with an
ever increasing population. Every increase demands greater efficiency of resource
utilization, something which can only happen with high levels of invention. You have
ignored the incentive effect that such protections have on technological development.

> As Friedman notes, the Coase theorem states that if transaction costs are
> zero, externalities will be handled efficiently; that is, in this case, if
> transaction costs were zero, the inventor could simply say "OK, world.
> I've got my idea. I'll tell everyone who wants to make a product with it,
> all at once, if you all pay me your fair share in doing so." Clearly this
> cannot happen due to the fact that transaction costs are high; trying to
> arrange such a bargain would be particularly difficult, especially
> considering that you would have to provide provisions to correct for those
> who would hold out on the deal, cheat, etc.

Exactly, which is why your concept cannot work and maintain a decent level of
technological advancement.

> In reality, one of two things might happen: either we might enforce
> intellectual property, and as a result pay the high cost of trying to
> enforce these laws (especially high over the Internet, where copying is
> easy, anonymity cheap and encryption ubiquitious) as well as the
> deadweight loss resulting from monopoly, or we should suffer
> inefficiencies as inventors are not paid quite as much as they are worth
> to society, resulting in a naturally lower price for invention, and thus
> some deadweight loss as inventors produce fewer inventions than they
> otherwise would.

There are many ways to doctor information to ensure that it can be identified as a copy.
For example, in my work, I deal with mail list brokers. We do mailstream processing for
their customers. The broker will send us a tape or disk with file(s) that the customer
rents from the broker for a single or more use. The customer then does his or her mail
campaign with the rented list. The doctoring comes in in that the list is seeded with
dummy name records which are set up by the broker. The customer does not know what names
are seed names and what are real names, so they send their mail campaign to all of the
names. The seed names receive the capaign materials (magazines, junk mail, free samples,
what have you) and log it. If the customer is larcenous, they will try to use the rented
list more than once, and wind up sending materials to the address the other times,
including to the seed addresses. THis way, the broker knows that the customer is breaking
the list rental agreement and can charge the customer for additional use of the list.

Intellectual property enforcement costs are extremely low, because it is very easy for
the public to know when a product is a knock off or not. Granted they have gone up in
recent years, but only because we have opened our economy wide to the Chinese, who have
no respect for intellectual property, nor any other type of property or individuality, it
seems. Rather than looking at pirating as a positive externality, look at the cost of
enforcement as an externality created by pirates that everyone has to pay. If trade with
pirate economies were cut off, our cost of intellectual property enforcement would go
down again.

> Now, if we accept an economic analysis of law, then the question we should
> be asking ourselves is: what form of intellectual property rights, if any,
> is economically efficient? I say that enforcing intellectual property
> rights is more expensive than it is worth; while both result in deadweight
> losses, if we presume that the supply curve for COPIES of the information
> (or products produced using the idea) would be fairly elastic, a
> reasonable presumption considering the ease of copying these days, the
> halving of marginal revenues for monopolies would result in drastic
> reductions in quantity, by up to 50% as the supply curve approaches total
> elasticity. Chances are something closer to 40% of the market is lost
> thanks to monopolization. And this doesn't yet consider the cost of
> enforcement.

You have to date, only guessed. Since the current situation is one where intellectual
property is respected and enforced, I think that the onus is on YOU to prove your point
with real numbers. Until you do, all we can think of your ideas is that they are quaint
fantasy with no basis in fact.

> On the other hand, without intellectual property, these enforcement costs
> would vanish; the only deadweight loss would be that from undervalued
> invention. While it is difficult to estimate precisely HOW undervalued
> the price would be, as it would depend on the percentage of the
> marketplace with which inventors would be able to sign a contract, it is
> not immediately apparent that the inventor faces either a high or a low
> elasticity in supply of ideas; I'd guess that it is probably not so
> inelastic as the supply of copies is elastic.

I think that history shows that lack of intellectual property enforcement causes
invention to be severely undervalued. Looking at how national borders create natural
limitations on intellectual property rights, and how making such rights enforceable
across borders via tools such as GATT it seems rather clear that prior to enforced
intellectual property rights, invention was severly undervalued, and the rates of
productivity growth suffered as a result. Today's startling increases in productivity
just a few years after GATT are proof that expanding the incentive to invent expands the
rate of invention and therefore the rate of productive growth

> Even if I am not precisely
> right on this point, however, intellectual property is still not worth
> enforcing if the deadweight loss due to undervaluing invention MINUS the
> cost of enforcing intellectual property (a non-trivial value) is less than
> the deadweight loss due to monopolization. That is, even if the cost of
> undervaluing inventions were greater than the cots of monoplization, it
> still wouldn't necessarily be efficent to enforce intellectual property
> because you would have to add on the cost of actually ENFORCING the law.

Considering that you have refused to respond to my refutation of your assertion that an
invention is a monopoly, your argument does not stand. Any engineer will tell you that
there are always many many ways to solve a problem. Only problems are unique. Invention
is not a monopoly market.

> In this case, I don't think it's possible to make a reasonable case that
> enforcing intellectual property rights eliminates more economic deadweight
> loss than it costs, especially considering that it very likely ADDS to
> economic inefficiency rather than reduces it, even if the cost of
> enforcement were free. I am anxious to see how or if you can show me to
> be wrong.

I don't need to. The present economy is my own proof. YOU need to come up with proof that
economic growth would be higher without such protections. That the US has one of the
highest levels of intellectual property protections, along with among the top 3 or 4 per
capital incomes/standards of living, and among the highest economic and productivity
growth rates for a nation at its state of development (a third world with a 50% growth
rate doesn't mean anything if they are starting from nothing.)

> > Also, you are still ignoring my question as to why I or anyone should invent
> > something to benefit others without our say so as to who can benefit freely from it
> > and who pays. Anything less is theft.
> Theft does not exist where property rights do not exist.

No, theft is when someone benefits from someone else without that persons permission or
acquiescence. To fail to protect the product of an individuals mind is to declare that
all minds are slaves to society, that the individual has no rights at all. That is a
collevtivist, subjectivist, post modern scam if ever I heard one.

> In the same way,
> a feudal lord is not breaking the law when he exploits his serfs;
> rather he defines the law in such a way as to make his actions legal. I
> agree that his actions SHOULD be illegal, but not because it's theft, but
> because rigged laws are economically inefficient, and thus fail to maxmize
> utility. In contrast, I argue that intellectual property should not be
> enforced, because doing so is not ecnomically efficent, and therefore
> fails to maximize utility.

Fails to maximize the utility of what or who?? Society? Sorry, society has no rights, and
is not entitled to its own utility. Lack of intellectual property is enslavement of the
mind to the collective. Bye Bye BORG.

> > All you are doing is akin to an attempt to legislate PI to equal 3.
> Seems to me that this line could be used by anyone against anyone who
> disagrees with them politically. Empty rhetoric, I say; I could just as
> well say the same thing to you.

Hardly. As history has shown intellectual property works (American history). Lack thereof
does not work (most everywhere else's history)

> > Get off your
> > subjectivist, post modern butt and pay for what you use. No free lunches.
> >
> I'm no subjectivist, nor am I politically postmodern. Politically, I am a
> libertarian, and I justify my views through utilitarian principles.

Are you utilitarian or libertarian. There is a distinct difference.

> I
> support property rights because they are better for us than socialism, not
> because they are objectively morally right. I am also fully prepared to
> pay for my choice of property rights in the deadweight loss which would
> result from economic inefficiency. Are you prepared to pay the cost of
> enforcing a bad law? Or were you looking for that free lunch yourself?

You have yet to objectively and scientifically demonstrate that it is a bad law. The only
dead weight here are those who steal the product of another's mind.

   Michael Lorrey
------------------------------------------------------------ Inventor of the Lorrey Drive
MikeySoft: Graphic Design/Animation/Publishing/Engineering
How many fnords did you see before breakfast today?