Monopoly Kills Creativity

Posted: 30 January 2009 by Jeffrey A. Tucker in Political Science
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Jeff Tucker, editorial vice president of the Mises Institute, on the new frontier in “IP”.

Against Intellectual Monopoly might have begun with a story about the failed attempts to stop illegal downloads or the wicked crackdowns on teens for file sharing. Instead the authors take us back to the Industrial Revolution to explode the myth of the supposedly great innovator James Watt and his steam engine.

Why? Because, as the introduction points out, this is a book of economics. If you have something to add to the science, it can’t just apply to now, or last year, in this place, or just that place. Economics is a universal science. Its laws and lessons apply to all times and places. For this reason, a theoretical breakthrough is a massive event. It means work for generations of scholars: revising history, fine-tuning other aspects of theory, applying it to different fields.

This is one reason that this book is so important. And sensing that they are taking on more than just the problem of digital downloads, they put this ancient history up front. They take the first crack at revisionist history with regard to a famous patent.

They show that most of Watt’s energies were spent lobbying for and defending a government patent on a technology that was quickly surpassed but could not come to market thanks to his rent-seeking behavior. Nor was this patent somehow necessary for his economically useful behavior. It wasn’t until after the patent expired that steam engine technology really took off, but by that time the Industrial Revolution gave up 10-15 years of what might have otherwise been economic progress.

There we have it: we are put on notice that this book is not merely about the digital age or life after the internet, written by a couple of geeks. No, this is a revisionist treatment of the whole subject that applies not only now but in the whole modern history of ‘intellectual property’, which they insist on calling “intellectual monopoly”.

Next they stake out their unique position, which is neither that patent and copyright law has gone too far nor that it hasn’t gone far enough. They take a third position that only a few dare take: the stuff needs to be abolished altogether. Their grounds aren’t nearly as complicated as one might as first think.

Grant that “everyone wants a monopoly. No one wants to compete against his own customers, or against imitators. Currently patents and copyrights grant producers of certain ideas a monopoly.”

Next concede a point that everyone brings up first: “Certainly few people do something in exchange for nothing. Creators of new goods are not different from producers of old ones: they want to be compensated for their effort.”

Now the core of the argument: “it is a long and dangerous jump from the assertion that innovators deserve compensation for their efforts to the conclusion that patents and copyrights, that is monopoly, are the best or the only way of providing that reward…. creators’ property rights can be well protected in the absence of intellectual property, and that the latter does not increase either innovation or creation. They are an unnecessary evil.”

They continue to spell out precisely what they mean. They favor the property rights of producers. The property rights of innovators should be protected, and so should the property rights of those who have a copy of the idea of the creator. The first property right encourages innovation. The second property right encourages diffusion, adoption, and improvement of innovation.

The question is whether creators should have a right to dictate how purchasers use a creation. To say they should amounts to a claim not of property rights but of ‘intellectual property’. It confers a privilege and restricts third parties in what they can do with property. It is a grant of monopoly privilege. Monopolies are not friends of innovation in any area of life. They don’t go into detail here, but we know this by looking at the Post Office or the public schools or the utility companies. All the sectors controlled by monopolists are characterized by high prices, low innovation, and stagnation generally.

How odd it is that we believe otherwise – this one kind of monopoly is something we can’t live without! – with intellectual property!

The authors point out that the supposed incentive to create is a double-edged sword. Someone pays the bill. It’s not as if the creator benefits and nothing else happens. For example, they cite the case of a movie that costs $218 cost $400,000 in music rights. This is a serious social cost. It is largely an unseen cost too. Think of the movies that are not made, the profits in publishing that are never seen, the inventions that are delayed or never come to market, the alternative use of the billions and billions that are spent by consumers on patented drugs.

The introduction also deals with the U.S. Constitution’s endorsement of copyright and trademark. They say that it is outmoded but no more than that. For my own part, I’m somewhat curious about this. Many parts of the Constitution are fundamentally anti-monarchical (only republican governments permitted in the states, e.g.). The history of patent legislation in England prompts me to wonder if the purpose of this clause is to say that government will not own and dispense mercantilist privileges; rather individuals alone will possess such rights. It was supposed to be a point against kingly privilege; still misguided, to be sure, but one can make a bit more sense of it in this case.

The first chapter is highly provocative and puts the reader on notice that a wild ride is coming. They authors don’t disappoint.

People sometimes ask about research projects. What the authors have done with the Watt case could be done for a thousand other cases. There is so much work to do, and so much rethinking to do.

Originally posted on on 24 Jan 09. Jeffrey Tucker [send him mail] is editorial vice president of


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