Transcript The Problem with IP Stephan Kinsella Libertarian Papers, C4SIF.org, Mises.org “IP Debate: John Templeton Foundation’s Big Questions Debate series on Intellectual Property and Wealth Creation” The.

The Problem with IP
Stephan Kinsella
Libertarian Papers, C4SIF.org, Mises.org
“IP Debate: John Templeton Foundation’s Big Questions
Debate series on Intellectual Property and Wealth
Creation”
The Ohio State University Moritz College of Law Student
Chapter of The Federalist Society
Moritz College of Law, Ohio State University, Columbus
OH
March 3, 2011
1 | The Problem with IP
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Stephan Kinsella | Feb. 18, 2011
The Libertarian Mentality
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Humans are dissatisfied creatures. That is why we act: we
employ means that are causally efficacious at changing the
state of affairs that would otherwise occur, so as to achieve
ends and thus ameliorate felt uneasiness.
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Ludwig von Mises, Human Action, 4th ed. (Irvington-on-Hudson, N.Y.: Foundation
for Economic Education, 1996), pp. 13–14, et pass.
These means, and our bodies, are necessarily scarce, or
rivalrous. This means there is the possibility of violent conflict
when two people struggle over a given scarce resource.
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Hoppe: “[O]nly because scarcity exists is there even a problem of
formulating moral laws; insofar as goods are superabundant (“free”
goods), no conflict over the use of goods is possible and no actioncoordination is needed. Hence, it follows that any ethic, correctly
conceived, must be formulated as a theory of property, i.e., a theory of
the assignment of rights of exclusive control over scarce means. Because
only then does it become possible to avoid otherwise inescapable and
irresolvable conflict.” –A Theory of Socialism and Capitalism, p. 235 n. 9.
2 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
The Libertarian Mentality
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In other words, libertarians favor peace, cooperation, and
prosperity, and thus the assignment of property rights so that
resources may be used peacefully and productively and
cooperatively.
In particular we favor the assignment of property rights as
follows: each person owns his own body; and he owns resources
that he homesteads or that he acquires by contract from a
previous owner.
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Stephan Kinsella | Feb. 18, 2011
The Libertarian Mentality
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This is why we oppose patent and copyright. We views the grant
of such artificial rights as statist, socialist, as theft.
This is because these rights grant to third parties—inventors,
artists, creators—a veto right over how owners use their own
property. This makes the innovator a co-owner, with the original
owner, of the owner’s property.
This is theft. It is redistribution of wealth.
It is that simple.
The patentee, for example, acquires a partial ownership right in
others property
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But he is not a homesteader, and has no contract, and the owner has not
committed any kind of tort of crime to justify weakening or redistributing
his property rights
4 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
The IP Mistake
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How could libertarians and other advocates of property rights,
capitalism, and free markets have been bamboozled into
thinking that anti-competitive monopolistic grants of privilege
by a criminal state be justified?
Let’s take a look at the history.
5 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
Sordid Origins
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“The monopolies now understood as copyrights and patents
were originally created by royal decree, bestowed as a form of
favoritism and control. As the power of the monarchy dwindled,
these chartered monopolies were reformed, and essentially by
default, they wound up in the hands of authors and inventors.”
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Eric E. Johnson, “Intellectual Property’s Great Fallacy” (2011)
Copyright: Queen Mary creates the Stationer’s Company in
1557, with the exclusive franchise over book publishing
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monarchy’s desire to control the press
Charter expired; publishers asked for statute
Statute of Anne 1710: gave copyright to authors instead
Authors happy to be partially freed from state censorship
6 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
Sordid Origins: Patent
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English Parliament enacts the Statute of Monopolies 1624
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reaction against monarch’s issuing of “letters patent” granting
monopolies to court favorites in goods or businesses which had long
before been enjoyed by the public
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Other notorious uses
Piracy authorized for Sir Francis Drake by Letter Patent, 1587
Real piracy, not file sharing
Statute banned letters patent generally but carved out an exception for
novel inventions
7 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
IP in America
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Patent and copyright clause included in Constitution, 1789
Not based in natural law
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Tom W. Bell, Intellectual Privilege: A Libertarian View of Copyright
Based on assumption that it’s “necessary” or generates net
innovation/creativity/wealth
8 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
IP in America
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Studies since cannot verify this—or condemn IP
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“No economist, on the basis of present knowledge, could possibly state
with certainty that the patent system, as it now operates, confers a net
benefit or a net loss upon society. The best he can do is to state
assumptions and make guesses about the extent to which reality
corresponds to these assumptions. … If we did not have a patent system,
it would be irresponsible, on the basis of our present knowledge of its
economic consequences, to recommend instituting one.”
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Fritz Machlup, An Economic Review of the Patent System (1958)
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See also Kinsella, Yet Another Study Finds Patents Do Not Encourage Innovation
My estimate: $42B net loss a year in US from patents alone
Burden on proponents to justify it
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I invite my opponent to tell us the net benefit of the patent system: what
is its cost; what is the value of extra innovation it induces; what is the
cost of innovation it suppresses; what is the net?
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Kinsella, There’s No Such Thing as a Free Patent
9 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
IP in America
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Arguably unconstitutional because does NOT promote progress
of science and arts
In the meantime becomes part of fabric of western capitalism
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Starts being called a “property right”
“Those who started using the word property in connection with
inventions had a very definite purpose in mind: they wanted to substitute
a word with a respectable connotation, “property”, for a word that had
an unpleasant ring, “privilege”.”
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Fritz Machlup & Edith Penrose, The Patent Controversy in the Nineteenth
Century (1950)
See Kinsella, “Intellectual Properganda”
IP justified now on grounds that it is a natural right (despite
original purpose) or on empirical grounds (despite lack of
evidence)
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Similar to minimum wage: economists universally recognize it is
counterproductive but hard to kill politically
10 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
IP in the Constitution
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Libertarians and propertarians now assume “intellectual
property” is part of a property rights system
After all, the Constitution permits IP
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But then the Constitution was a centralizing, power-grabbing coup
It also condoned or permitted slavery, paper money (and inflation and
the business cycle), judicial supremacy, taxation, tariffs, capital
punishment, conscription, war, corruption, domination, drug prohibition,
mass murder, war crimes, torture, Guantanamo, Waco, Ruby Ridge, the
evil Abraham Lincoln, suspension of habeas corpus, imperialism, eminent
domain, state-enforced bigotry, racism, and misogyny
Spooner: the Constitution “has either authorized such a government as
we have had, or has been powerless to prevent it. In either case, it is
unfit to exist” –No Treason, No. 6: The Constitution of No Authority (1867)
The Constitution is utterly unlibertarian. We libertarians have to wake up
and stop worshipping the Constitution as quasi-libertarian and early
America as proto-libertarian. They weren’t.
As Rand might say, wishing doesn’t make it so.
11 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
Speaking of Rand…
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Huge influence
Part of the movement to describe patent and copyright as
“property rights”
“Patents are the heart and core of property rights.”
But then, she initially favored eminent domain because the
Constitution endorses it.
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Rothbard’s correspondence
12 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
Intellectual Monopoly
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Despite propaganda patent and copyright are still artificial state
monopolies
The goal of law is justice and property rights, not tweaking
incentives to produce innovation or maximize wealth
The purpose of property rights is to fairly assign owners to
scarce resources so that they may be used peacefully and
productively instead of being fought over
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To reduce conflict
Human action uses scarce means to achieve ends, but it guided
by ideas
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knowledge, information, recipes
Property is necessary in the scarce means for productive use and
cooperation
Not in information (cake example)
13 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
Intellectual Monopoly
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Patent and copyright are ultimately enforced against scarce
goods
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IP rights are merely disguised transfers of wealth from owners
to innovators and others who receive a state privilege
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Money, bodies
Who did not homestead the others’ property or make a contract with
them
IP undermines legitimate property rights
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Propertarians are anti-IP just as they are anti-tax and anti-redistribution
14 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
Competition, Learning, Emulation
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The market creates abundance in the face of scarcity of
resources
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The body of human knowledge grows
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Tries to reduce scarcity of material things
Widens the universe of choices of means AND ends
It is non-scarce
“there is no discovery—not even the most minor intellectual advance—in
any corner of the world that does not soon become known from one end
of the earth to the other, like liquid in connecting vessels that seeks a
common level.” –Maria Montessori, Education and Peace (2007 [1937]),
p. 42.
Artificially imposing scarcity on learning, emulation, knowledge
is suicidal
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Kinsella, Intellectual Freedom and Learning Versus Patent and Copyright
15 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
Legislation and Law
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In 1884 James C. Carter wrote an attack on David Dudley Field’s
attempt to (legislatively) codify New York’s common law.
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Carter opposed replacing case law with centralized legislation.
caselaw precedents are flexible and allow the judge to do justice, while
statutes are applied literally, even where injustice is done or the
legislator did not contemplate this result.
one of the worst effects of legislatively codifying law–replacing
organically developed law with artificial statutes–is that it changes the
role of courts and judges from one in which the judge searches for justice
into mere squabbles over definitions of words found in statutes.
16 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
Legislation and Law
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“At present, when any doubt arises in any particular case as to what the
true rule of the unwritten law is, it is at once assumed that the rule most
in accordance with justice and sound policy is the one which must be
declared to be the law. The search is for that rule. The appeal is squarely
made to the highest considerations of morality and justice. These are the
rallying points of the struggle. … But when the law is conceded to be
written down in a statute, and the only question is what the statute
means, a contention unspeakably inferior is substituted. The dispute is
about words. The question of what is right or wrong, just or unjust, is
irrelevant and out of place. The only question is what has been
written. What a wretched exchange for the manly encounter upon the
elevated plane of principle!”
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James C. Carter, 1884, The Proposed Codification of Our Common Law: A
Paper Prepared at the Request of The Committee of the Bar Association of
the City of New York, Appointed to Oppose the Measure
17 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
Legislation vs. Law
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Bruno Leoni: there is much more certainty in a decentralized
legal system than in a centralized, legislation-based system.
When the legislature has the ability to change the law from day
to day, we can never be sure what rules will apply tomorrow.
By contrast, judicial decisions are much less able to reduce legal
certainty than is legislation.
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the position of common-law or decentralized judges is fundamentally
different from that of legislators in three respects.
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1 judges can only make decisions when asked to do so by the parties
concerned.
2 the judge's decision is less far-reaching than legislation because it primarily
affects the parties to the dispute, and only occasionally affects third parties
or others with no connection to the parties involved.
3 a judge's discretion is limited by the necessity of referring to similar
precedents.
18 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
Legislation and Legal Certainty
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Legal certainty is more attainable in a relatively decentralized
law-finding system like the common law, Roman law, or
customary law, than in centralized law-making systems where
legislation is the primary source of law.
19 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
Negative Effects of Uncertainty
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Legislation tends to interfere with agreements that courts would
otherwise have enforced and thereby makes parties to contracts
less certain that the contract will ultimately be enforced.
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Thus, individuals tend to rely less on contracts, leading them to develop
costly alternatives such as structuring companies, transactions, or
production processes differently than they otherwise would have.
increased uncertainty in legislation-based systems also increases
overall time preference.
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When time preferences are lower, individuals are more willing to forgo
immediate benefits such as consumption, and invest their time and
capital in more indirect (i.e., more roundabout, lengthier) production
processes, which yield more or better goods for consumption or for
further production.
20 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
Negative Effects of Uncertainty
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Any artificial raising of the general time-preference rate tends to
impoverish society by pushing us away from production and
long-term investments.
Yet increased uncertainty, which is brought about by a
legislation-based system, causes an increase in time-preference
rates because if the future is less certain, it is relatively less
valuable compared to the present.
higher time-preference rates also lead to increased crime
As a person becomes more present oriented, immediate
(criminal) gratifications become relatively more attractive, and
future, uncertain punishment becomes less of a deterrent.
21 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
The Proliferation of Laws
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A continual outpouring of artificial laws has many insidious
effects.
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special-interest groups become successful, and others become necessary
for self-defense.
Soon a legal war of all against all begins to emerge. Thus we are led into
conflict rather than cooperation.
With so many laws, it becomes impossible for each citizen to avoid being
a lawbreaker — especially given the perverse rule that "ignorance of the
law is no excuse.”
We are all lawbreakers
Discredits the law
Allows the state to selectively and arbitrarily enforce whatever law is
convenient against any "troublemaker."
22 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011
The Proliferation of Laws
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Italian legal theorist Giovanni Sartori pointed out that when
legislation is thought of as the primary source of law, citizens
become more accustomed to following orders
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They become more docile, servile, and less independent.
Once people lose their rebellious spirit, it is easier and more likely for the
government to become tyrannical.
The Role of Commentators and Codes
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Private codification
Blackstone, Coke, ALI Restatements
23 |The Problem with IP
Stephan Kinsella | Feb. 18, 2011