Intellectual Property, Fire, and Other Dangerous Things

Intellectual Property, Fire, and Other Dangerous Things

Whenever you are talking about IP to a group of libertarians, classical liberals, Austrians, and objectivists, you are always playing with fire.

Whenever you are talking about IP to a group of libertarians, classical liberals, Austrians, and objectivists, you are always playing with fire. There is no ruling out that even more, dangerous things might occur since this is one of the few fields where we really don’t agree and agreement is difficult to find.

Intellectual property and the middle ground of dealing with it (if there is one)

Why is there more money being invested in the development of video games than in the research of new drugs and medicine? Every year, almost 200 billion dollars are invested in the development of new video games. At the same time, the innovation rate of medical research is dropping. And here comes the interesting part – video games have much less IP protection than drugs have. Famously, or infamously, depending on where you stand on the issue, the development of drugs and medical research has one of the most stringent IP regimes on the planet. Video games have not. How is it that the one without IP protection is innovating and getting ever more money and the one with the IP is losing on innovation? It would be unfair and analytically imprecise to say “it is because of the IP.” But it’s not nonetheless noteworthy that there is this big difference and that IP plays a role in it.

What do libertarians, classical liberals, Austrians, and objectivists think about IP rights

We are split into different camps. Some of us don’t want IP. Stephan Kinsella, “the IP man,” is an economist and a lawyer who claims that IP is a fundamental analytical mistake and more than that IP infringes on real property rights. Imagine that, I, Henrique, copyright or patent the concept of the house. I claim it’s mine and exclude you from using the concept house. Therefore, you will not be able to build your house and by me doing so I am infringing on your own proper property right. This is actually an anti-libertarian, anti-economic, and anti-property principle.

Roderick Long claims that IP is unnecessary on the empirical ground only. By reviewing a lot of cases he finds out they have nothing to do with IP. Is it credible, so goes Long, that authors will not be motivated to write unless they are given copyright protection? Not really. Consider the hundreds of thousands of articles uploaded on the internet by their authors every day, available to anyone in the world for free. Is it credible that publishers will not bother to publish uncopyrighted words for fear that a rival publisher will break in and ruin their monopoly? Again, Long’s answer is “not really.” Nearly all words written before the 1900s are in the public domain. Yet, pre-1900s words are still published and still sell well. Long continues, “Is it credible that authors in a world without copyrights will be deprived of remuneration for their work?” Again, says Long, not likely. In the 19th century, British authors had no copyright protection under American law, yet they received royalties from American publishers nonetheless.

So what is the deal with IP rights according to Long? IP rights have no economic implication. They are just surplus rents squeezed out by rent-seekers, not entrepreneurs, who want the government to grant them a monopoly. Empirically, IP does not lead to innovation. Empirically, it leads to only these rent-seeking behaviors, claims Long.

There are some economists and scholars in this libertarian-at-large camp who favor IP. Ayn Rand, the founder of Objectivism was big on IP. She thought it to be a big part of the commercial society. In Capitalism: The Unknown Ideal patents and copyrights are viewed as legal implementations of the base of all property rights. Immense right to the product of his mind. On the other hand, what the patent and copyright laws acknowledge is the paramount role of mental effort in the production of material values. These laws protect the mind’s contribution in its purest form of origination of an idea.

I don’t think is possible to be much more Austrian than Ludwig von Mises. In Human Action, the stepping stone of his work, Mises makes a claim in favor of IP. He says that without IP it is unlikely that people would undertake the laborious task of writing such things as textbooks, manuals, handbooks, and other non-fiction work. Furthermore, it is probable that technological progress would seriously be retarded without IP.

Maybe some of you will say that although Mises was an Austrian he was a bourgeoisie. If you have anyone thinking more liberally about the world, an anarchist perhaps, then you will certainly have someone against IP. Maybe so, but even anarchists are in favor of IP. Lysander Spooner is the father of anarchism in the U.S. Verbatim from The Law of Intellectual Property he claims “so absolute is an author’s right of dominion over his ideas that he may forbid it being communicated even by human voice if he so pleases.” In short, an absolute intellectual property right.

As you can see, the camp is split, but there is a middle ground. And it might astonish you that Murray Rothbard is the middle grounder. Why? Murray Rothbard understood that there is a role for intellectual property rights. Yes, he did not like absolute protection. Yes, he was against state protection. But, in several works, he ruminated the idea that there could be a weak form of IP right negotiated by private agents, that you can put it in a contract, and that this contract would, to some degree, restrain the ability of the other to further use your idea.

This is one of those ideas that Rothbard left uncompleted. Some of his followers thought that you could come up with some form of insurance product for your copyright, that you could put this copyright in the database and just the publication would make it clear that it is your idea. So, there is a communitarian way of taking care of your IP. All these models have been under-explored.

Marshall van Alstyne and Geoff Parker (which I don’t know whether are libertarians or not) research online digital platforms. They have no stake in the game. What they did find out surprisingly is that on digital platforms there is a private negotiation of IP. The idea of a platform ecosystem is to have a lot of participants that develop things together. In order to develop things together, they need some kind of access to each other’s technologies (for example, in form of interfaces). They also need access to each other’s ideas and business processes. In this digital private ecosystem world there is IP negotiation that at the same time keeps in some conservative sense some IP, but at the same time makes the participants want to share it with the others. This is not by design, but by the outcome of the platform experience because the more participants in the platform, the more integrated it is, the more value everyone will have. This vaguely exposed system of private enforcement of some kind of IP, while also privately making some pressure on sharing stuff is feasible in a digital world.


Of course, Murray Rothbard did not think of the digital world. And of course, van Alstyne and Parker did not quote Rothbard. But that is not the point. The point is that in a conservative way, in a very reduced form of what IP might be, there is room for private contractualism. And this we know from empirical evidence. Van Alstyne and Parker found it out. They saw that platforms are doing it already. They did not invent it. The platforms are preserving a reduced sense of IP while making the IP holder share much more than he would be willing to if he had absolute protection.

This is interesting not only academically but also practically because if you look at the world today, iP is a mess. IP goes with a lot of bureaucracy. Anyone that tried to have a patent introduced or copyright protected knows how difficult it is. It is also a kind of a vicious circle because the more bureaucracy there is the more protection do companies want. If they have to go through all the bureaucratic hurdles, they would want to be protected. This is a circle that creates more and more bureaucracy In order to give more and more IP. At the same time, IP, as it is handled today by the government, is full of lobbyism. In every parliament worldwide there is a series of lobbyists trying to lobby for more and more particularistic IP. Also, there is sufficient evidence nowadays that IP leads to anti-competitive behavior and inertia.

Whether you like it or not, there is a real problem. But there is also a way of dealing with it. Or at least a promising way which is not only to accept whatever companies want, because you allow them to be rent-seekers. And we don’t rent-seekers but entrepreneurs. Entrepreneurs negotiate terms of trade and that is why I say there is hope for IP in a reduced sense. To maintain it via contractualism, in networks that keep all the dynamism going. Whether you call it multi-sided platforms or multi-sided business models, in all those private ecosystems, you have some negotiation of IP. Not in the way Murray Rothbard imagined them, but maybe in a way that might be the middle ground for us and also an innovative middle-ground for society and economics at large.


  • Henrique Schneider is the head of economic policy at the Swiss Federation of Small and Medium Enterprises. He publishes regularly on Austrian Economics, Asia, and international politics. Among his books are “Uber: Innovation in Society”, “Creative Destruction and the Sharing Economy”, and “Introducing the Political Philosophy of Hanfei”. Henrique also teaches economics at the NORDAKADEMIE in Elmshorn, Germany.

The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.


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