The Jobs Argument for SOPA and PIPA or for Broader Copyright, More Generally, Represents a Perfect Example of Frederic Bastiat's Broken Window Fallacy

In that sense, the jobs argument for SOPA [Stop Online Piracy Act] and PIPA [Protect Intellectual Property Act] or for broader copyright, more generally, represents a perfect example of Frederic Bastiat's Broken Window Fallacy. Writing in 1850, Bastiat emphasized the need to account in economics and politics both for that which is seen and that which is not seen. ("Ce qu'on voit et ce qu'on ne voit pas.") When a boy breaks a shopkeeper‘s window, the shopkeeper must employ a glazier to fix it. If we focus solely on the employment of the glazier—that which is seen—then one might conclude that the government should hire children to go around breaking windows in order to increase the employment of glaziers in the economy. However, as Bastiat cautioned, we must also account for that which is not seen. Because the shopkeeper had to spend his money on the glazier, he could not spend that money elsewhere: on new shoes or a new book for his library. When we account for this lost spending elsewhere—that which is not seen—we find that the broken window generates no net stimulus to employment. The glazier earns more; but whoever would have received that money but for the broken window—whether cobbler, bookseller, or another—earns exactly that much less.

The mercantilist argument for broader copyright suffers from much the same fallacy. It urges us to focus solely on that which is seen—the increased revenue and enhanced employment broader copyright brings to the copyright industries. It asks us to ignore that which is not seen—the reduced revenue and diminished employment broader copyright brings to every other sector of the economy. Once we account for both that which is seen and that which is not seen, we find the mercantilist argument for broader copyright entirely empty. Just as the broken window generates no net stimulus for the economy, so too does broader copyright. Whatever increased revenue broader copyright generates for the copyright industries, it simply takes from elsewhere in the economy.

--Glynn S. Lunney Jr., "Copyright's Mercantilist Turn," Florida State University Law Review 42, no. 1 (Fall 2014): 99-100.

It Will Be Noticed How Closely the Copyright Act of 1709-10 followed the Patent System for Inventions, as Preserved in the Statute of Monopolies of 1623

In view of the claims which the Stationers' Company had hitherto made, the terms of the Copyright Act of 1709-10 are significant. In the case of existing books, the Act gave the authors, or if they had transferred their rights (which, of course, they almost invariably had) the then proprietors, the sole right of printing them for twenty-one years and no longer. In the case of new books, the author was given the sole right of printing them for fourteen years from the date of publication, and, if then still living, for one further term of fourteen years. The penalty for pirating was forfeiture and a fine of one penny per sheet, the protection extending only to books registered at the Stationers' Company. It will be noticed how closely the Act followed the patent system for inventions, as preserved in the Statute of Monopolies of 1623. The London booksellers, who must by then have despaired of ever securing the perpetual copyright which at one time they had claimed, had no reason to oppose the grant, enforceable in the Courts, of fourteen years of monopoly power for every new book they bought outright, although some of them subsequently protested when they realised that the second period of fourteen years granted to authors who were still living was the author's property to sell again.

--Arnold Plant, "The Economic Aspects of Copyright in Books," Economica 1, no. 2 (May 1934): 179-180.

We Have Come Full Circle from the Guild Monopoly of the Stationers' Company to the Guild Monopoly of the Digital Millennium Copyright Act

Copyright is dead. The Digital Millennium Copyright Act ("DMCA") has killed it. This does not mean that copyright has or will become irrelevant to the protection of creative works in this country. To the contrary, the exclusive rights set forth in Title 17 of the United States Code will continue to provide an important source of protection for works of authorship. The term "copyright," however, means more than a system of protecting creative works against unauthorized copying. Copyright signifies a system of protection designed and intended primarily to serve the public interest in the creation and dissemination of creative works, rather than the private interest of enriching those who create and disseminate such works. Where the first is copyright, the second is mere guild monopoly. With the enactment of the DMCA, there is a very real danger that our system of protecting creative works will serve primarily private interests. If so, then the protection of creative works will have come full circle, from the guild monopoly of the Stationers' Company to the guild monopoly of the DMCA, and copyright, in the sense of protection intended primarily to serve the public interest, will surely have died.

During the Anglo-American legal system's last experience with guild monopoly, the Stationers' Company of London controlled almost exclusively the publication of written works in England from 1556 to 1694. As one might expect, and as courts from time to time remind us, the Stationers' Company did not always, or even usually, exercise its control over printing in a benign manner designed to advance the public welfare as a whole. To the contrary, securing the profits of a favored few within the guild seemed to be the Stationers' Company's guiding principle. In the end, the English Parliament was persuaded by the Company's excesses to refuse to renew the last of the Licensing Acts through which the Company had maintained its power. A decade and a half later, those same excesses led the English Parliament to replace guild control with the first copyright statute, found in the 1709 Statute of Anne.

--Glynn S. Lunney Jr., "The Death of Copyright: Digital Technology, Private Copying, and the Digital Millennium Copyright Act," Virginia Law Review 87, no. 5 (September 2001): 814-815.

Locke Described Legislation Authorizing the Stationers' Company Monopoly on Printing (Copyright Act) as an Invasion of the Trade, Liberty, and Property of the Subject

I doubt that Locke's theory can justify copyright. To Epstein's trenchant critiques, I add one targeted at any supposed natural property right in expressive works: copyright contradicts Locke's own justification of property. Locke described legislation authorizing the Stationers' Company monopoly on printing--the nearest thing to a Copyright Act in his day--as a "manifest . . . invasion of the trade, liberty, and property of the subject." Today, by invoking government power a copyright holder can impose prior restraint, fines, imprisonment, and confiscation on those engaged in peaceful expression and the quiet enjoyment of tangible property. Copyright law violates the very rights--the tangible property rights--that Locke set out to defend. It gags voices, ties hands, and demolishes presses. But when they do not live under the command of a sovereign, Locke explained, humans enjoy "a State of perfect Freedom to order their Actions, and dispose of their Possessions, and Persons as they think fit, within the bounds of the Law of Nature, without asking leave, or depending upon the Will of any other Man." By nature, in a "State of perfect Freedom," we can freely echo each other's expressions.

--Tom W. Bell, Intellectual Privilege: Copyright, Common Law, and the Common Good (Arlington, VA: Mercatus Center at George Mason University, 2018), 70-71.

The Utilitarians Assumed that the Patent System Was Responsible for the Greater Part of Inventing Activity but They All Failed to Ask Themselves about the Opportunity Costs of Inventing

The economists of the early nineteenth century who considered the question were as definite as Professor J. B. Clark that inventions would practically cease if the patent system were abandoned. Jeremy Bentham was in no doubt at all (Rationale of Reward): " With respect to a great number of inventions in the arts, an exclusive privilege is absolutely necessary in order that what is sown may be reaped.... He who has no hope that he shall reap will not take the trouble to sow." John Stuart Mill's argument was similar. (Principles of Political Economy, Book V., ch. x, s. 4.) As Professor Taussig said, the utilitarians assumed that the patent system was responsible for the greater part of inventing activity. The question which they one and all failed to ask themselves, however, is what these people would otherwise be doing if the patent system were not diverting their attention by the offer of monopolistic profits to the task of inventing. By what system of economic calculus were they enabled to conclude so definitely that the gain of any inventions that they might make would not be offset by the loss of other output? By no stretch of the imagination can the inventing class be assumed to be otherwise unemployable. Other product which is foregone when scarce factors are diverted in this way completely escaped their attention.

--Arnold Plant, "The Economic Theory Concerning Patents for Inventions," Economica 1, no. 1 (February 1934): 39-40.

The Long-Venerated Idea that Legal Authority Must Provide Some Artificial Inducement to Artistic and Technological Progress Has Been Debunked and Falsified by the Evidence

The whole idea of copyright and patent law is that people won’t create or invent things without incentives. If people can just swoop in and make copies, the reasoning goes, these necessary incentives will be lacking. This is the classic economic argument for intellectual property law. And it makes perfect sense. But it turns out to be wrong.

Without anyone really noticing it, the primary rationale underpinning intellectual property law has become hollow. New strains of thinking in the fields of economics, psychology, and business management studies now debunk the long-venerated idea that legal authority must provide some artificial inducement to artistic and technological progress. At the same time, the incentive theory is being roundly contradicted by the deluge of citizen-produced digital content that is distributed over the internet without any expectation of compensation. These unfolding events confirm the view that has developed among social scientists: External rewards are, as a general matter, unnecessary for the flourishing of arts, entertainment, and technology.

Contrary to orthodoxy, the great driver of artistic and technological progress is not external, but internal. Call it inherent motivation. People have an intrinsic drive to create. Business firms have natural reasons for innovating. The idea of inherent motivation may be counter-intuitive, but the evidence is compelling. Survey-based studies and even controlled experiments have confirmed this view time and time again. Astonishingly, when it comes to the psychology of the individual, there is even evidence that extrinsic rewards have the opposite of the intended effect and can actually defeat inherent motivation, thus inhibiting creative and inventive endeavor. 

The upshot of all this is that is now possible to say with confidence that the classical economic dogma that lies at the heart of intellectual property law is a mistake.

The incentive theory is, and always has been, elegant. The simplicity and transparent logic of the incentive theory is one of its strongest features. But the theory’s attractiveness should not be allowed to hide its very best quality—its falsifiability. The incentive theory yields predictions about the world that can be tested. Specifically, the incentive theory predicts that economic actors will tend not [to] engage in economically valuable creativity and innovation without external rewards. And, as it turns out, digitally networked technologies have been testing this prediction. The evidence is in, and it refutes the theory. What’s more, work in business-management studies and the social sciences is putting together a new, more nuanced theoretical picture of innovation and creativity. That new theoretical understanding—while less elegant as a matter of theory—is manifestly in line with empirical observations. The necessary implication is that thinking about intellectual property must be completely revised.

--Eric E. Johnson, "Intellectual Property and the Incentive Fallacy," Florida State University Law Review 39, no. 3 (Spring 2012): 624-625.

In His Seminal Article, Harvard Law School Professor Stephen Breyer Questioned the Economic Justification for Granting Copyrights to Publishers

Copyright law, the legal regime mostly tied to the emergence of the printing press, may now come into question. Three hundred years ago, the Statute of Anne was adopted; this was the first copyright law actually tailored to address the book industry. Historically, publishers led the legal battles for adopting copyright laws that would enable them to obtain exclusive rights. Publishers have long argued that both the author and the investment of publishers in bringing a book to the market must be protected under copyright law. For many years, it was assumed that the interests of publishers and authors coincide, as publishers bear the cost and the risk involved in marketing a book. With the rise of eBooks, the role of publishers is declining, and consequently the case for granting copyrights to publishers is weakening.

Back in the 1970s, Justice Stephen Breyer, then a professor at Harvard Law School, questioned the economic justification for granting copyrights to publishers. In his seminal article, The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies, and Computer Programs, Breyer argued that copyright must be justified in a particular economic context and that technological changes may alter economic conditions, thus demanding a different legal policy. Breyer’s article is an invitation to challenge the necessity of copyright in a changing technological environment. Applying Breyer’s approach to digital publishing demonstrates the role of copyright in shaping digital markets.

This Essay questions the wisdom and legitimacy of granting copyright to publishers as the book market enters the digital age.

--Niva Elkin-Koren, "The Changing Nature of Books and the Uneasy Case for Copyright," George Washington Law Review 79, no. 6 (September 2011): 1713-1714.

There Is No Empirical Evidence That Patents Serve to Increase Innovation and Productivity; It Is Mature Industries Who Turn Toward the Legal Protection of Patents

The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity, unless productivity is identified with the number of patents awarded—which, as evidence shows, has no correlation with measured productivity. This disconnect is at the root of what is called the “patent puzzle”: in spite of the enormous increase in the number of patents and in the strength of their legal protection, the US economy has seen neither a dramatic acceleration in the rate of technological progress nor a major increase in the levels of research and development expenditure.

Both theory and evidence suggest that while patents can have a partial equilibrium effect of improving incentives to invent, the general equilibrium effect on innovation can be negative. The historical and international evidence suggests that while weak patent systems may mildly increase innovation with limited side effects, strong patent systems retard innovation with many negative side effects. More generally, the initial eruption of innovations leading to the creation of a new industry—from chemicals to cars, from radio and television to personal computers and investment banking—is seldom, if ever, born out of patent protection and is instead the fruit of a competitive environment. It is only after the initial stage of rampant growth ends that mature industries turn toward the legal protection of patents, usually because their internal growth potential diminishes and they become more concentrated. These observations, supported by a steadily increasing body of evidence, are consistent with theories of innovation emphasizing competition and first-mover advantage as the main drivers of innovation, and they directly contradict “Schumpeterian” theories postulating that government-granted monopolies are crucial to provide incentives for innovation.

--Michele Boldrin and David K. Levine, "The Case Against Patents," Journal of Economic Perspectives 27, no. 1 (Winter 2013): 3-4.

Orthodox Competition and Monopoly Theory Is Inherently Flawed and Misleading and Cannot Rationally Support Antitrust Policy; Antitrust Theory and History Are an Elaborate Mythology

This book is an attempt to analyze critically the theory and practice of an American sacred cow—the antitrust laws of the United States. Like all sacred cows, antitrust laws appear shrouded with an aura of authenticity and legitimacy. By and large, Americans still accept the view that antitrust has served to make the market economy more competitive and efficient, and that business monopoly would triumph in the absence of such legal prohibition.

Academic economists, for the most part, have created and sustained the public’s impression concerning monopoly and the antitrust laws. Two generations of economists, both liberal and conservative, have generally accepted antitrust as an important social force in maintaining competition and in limiting the difficulties commonly associated with monopoly power. Although some economists have disapproved of particular sections of the laws and particular enforcement procedures, and although a very few have called for repeal of specific antitrust statutes, the bulk of the academic economists have historically supported— and continue to support— antitrust and a vigorous enforcement policy. Indeed, some influential economists are committed to a substantial beefing up of antitrust enforcement, particularly in the price-fixing area, or alternatively, to additional legislation aimed at radically restructuring concentrated American industries. Despite the recent criticism, the antitrust philosophy is still a firmly entrenched part of the conventional wisdom of a mixed-enterprise system.

Yet importantly, this public and professional acceptance of the efficacy of antitrust depends upon important assumptions that are rarely made explicit or challenged. One assumption, for instance, is the belief that the standard theories of competition and monopoly developed by the economists are a correct perspective and can be applied meaningfully in the antitrust area. Another crucial assumption is the belief that antitrust history contains impressive empirical verification of the resource misallocations and monopolistic abuses suggested by the standard theoretical approach.

This study will maintain that neither of these important assumptions are valid. It will argue that orthodox competition and monopoly theory is inherently flawed and misleading and cannot rationally support antitrust policy. Further, it will demonstrate that the business organizations under indictment in the classic antitrust cases were expanding outputs, reducing prices, improving technology, and engaging generally in an intensely competitive process. It will conclude that both antitrust theory and history are an elaborate mythology with no solid foundation in either logic or fact.

--Dominick T. Armentano, introduction to Antitrust and Monopoly: Anatomy of a Policy Failure (New York: John Wiley and Sons, 1982), 2-3.

Collectivism Is the Epitome of Power-Based Thinking, that It Is Appropriate for Some People to Exercise Coercive Authority over the Lives and Property of Others

In his great book Boundaries of Order, Shaffer argues that people can best solve their problems and progress through peaceful social cooperation. To cooperate peacefully, they need to delimit property rights. As Shaffer puts it, “If we are to have the resilience to make life-enhancing responses to the world—to assess risks and other costs, and to settle upon an efficacious course of action—we must enjoy the autonomy to act upon our portion of the world without interference from others, a liberty to be found only in a system of privately owned property.”

Shaffer takes great pains to show how people can resolve whatever problems arise from their mutual interaction through setting the appropriate boundaries of their property rights. In settling their disputes on an individual basis, they manifest their respect for one another:

Private property, as a system of social order, reflects the extent to which we are willing to acknowledge one another’s autonomy and to limit the range of our own activities. Private property is the operating principle that makes real Immanuel Kant’s admonition: “Act so that you treat humanity, whether in your own person or in that of another, always as an end and never as a means only.”

Unfortunately, there is another way that people can choose to act. They can decide to solve their problem collectively, through resort to the State. Shaffer leaves us in no doubt what he thinks of this:

The twentieth century demonstrated to thoughtful men and women the totally inhumane nature of any system premised on political collectivism. A sign on a church in the former East Berlin that read “nothing grows from the top down,” succinctly identified the anti-life nature of all forms of institutionally-directed, collective control over people. Collectivism is the ultimate expression of the pyramidal model of the universe. It is the epitome of power-based thinking (i.e., that it is appropriate for some people to exercise coercive authority over the lives and property of others).

--David Gordon, introduction to A Libertarian Critique of Intellectual Property, by Butler Shaffer (Auburn, AL: Mises Institute, 2013), 11-13.

Everything That Is Truly Competitive and Rivalrous in the Real World Gets Labeled as Monopolistic and Resource Misallocating in the Alice-in-Wonderland Purely Competitive World

There are two avenues of criticism that one might take with respect to neoclassical monopoly theory. In the first place, one might criticize the purely competitive model which is employed as a benchmark and as a basis of comparison with monopolistic situations. And secondly, one might criticize the whole concept of nonlegal barriers to entry, arguing, instead, that it is simply consumer preference that "limits competition" and that consequently no misallocation of resources occurs.

Most economists would agree that pure competition is not actually possible. Some would agree, perhaps reluctantly, that it might not even be desirable or optimal if it could exist. (If they agree to this, of course, then they must also agree that moving toward pure competition is not necessarily desirable, either.) But few economists have noticed or emphasized the fundamental flaw of the purely competitive model, namely, that it is not a description of competition at all. Pure competition is a static, equilibrium condition whose very assumptions are such that competitive process is ruled out by definition. Or to put the matter more charitably, while pure competition may describe the final outcome of a particular competitive situation, the ultimate end result, it does not describe the competitive process that produced that particular outcome. The purely competitive theory is not a theory of competition as such.

The neoclassical habit of confusing competitive process with a final, static equilibrium condition makes for gross errors in economic analysis. For instance, product differentiation, advertising, price competition (including price discrimination), and innovation are rather routinely condemned as "monopolistic" and, thus, as resource misallocating and socially undesirable. This condemnation follows "logically" since not one of these activities is possible under purely competitive conditions. Hence everything that is truly competitive in the real world, truly rivalrous, gets labeled as "monopolistic" and resource misallocating in the Alice-in-Wonderland, purely competitive world. The analytical conclusions one is forced to come to, employing the purely competitive perspective, are not just wrong, not just unrealistic, but the very opposite of the truth. Far from being able to "predict," or tell us anything meaningful concerning competitive behavior, pure competition can only describe what things would be like if the world contained zombie-like consumers with homogeneous tastes, atomistically structured firms identical in every important respect, with no locational advantages, no advertising, no entrepreneurship, and no rivalry whatever. Surely this is the major flaw and absurdity inherent in the purely competitive perspective.

--D. T. Armentano, "A Critique of Neoclassical and Austrian Monopoly Theory," New Directions in Austrian Economics, ed. Louis M. Spadaro (Kansas City: Sheed Andrews and McMeel, 1978), 95-97.

What Economists Call Game Theory Psychologists More Accurately Call the Theory of Social Situations; the Branch Most Widely Used in Economics Is the Theory of Non-Cooperative Games

The heart of modern “rational” economic theory is the concept of a non-cooperative or “Nash” equilibrium of a game. If you saw the movie A Beautiful Mind this theory – created by Nobel Laureate John Nash – is briefly described, albeit inaccurately. But to put the oxen before the cart, let us first describe what a game is. A game in the parlance of a game theorist or economist does not generally refer to a parlor game such as checkers or bridge, nor indeed to Super-Mario III. Instead, what economists call game theory psychologists more accurately call the theory of social situations. There are two branches of game theory, but the one most widely used in economics is the theory of non-cooperative games – I shall describe that theory here.

The central topic of non-cooperative game theory is the question of how people interact. A game in the formal sense used by economists is merely a careful description of a social situation specifying the options available to the “players,” how choices among those options result in “outcomes,” and how the participants “feel” about those outcomes. The timing of decisions and the information available to players when undertaking those decisions must also be described.

The critical element in analyzing what happens in a game (or social situation) is the beliefs of the players: what do they think is likely to happen? How do they think other players are likely to play? From a formalistic perspective the beliefs of players are generally described by probability distributions – we assign a probability to an outcome – although in more advanced theories – such as epistemic game theory – beliefs are more sophisticated and mathematically complicated objects. Please observe that the notion that we are uncertain about the world we live in and about the people we interact with is at the very core of game theory.

Given beliefs about consequences and sentiments about those outcomes it is almost tautological to postulate that players choose the most favorable course of action given their beliefs. At one level this is what it means for players to be “rational” and should scarcely be controversial… yet many dense books have been written criticizing this notion of rationality.

--David K. Levine, ed., Is Behavioral Economics Doomed? The Ordinary versus the Extraordinary (Cambridge, UK: Open Book Publishers, 2012), 5-6.

Intellectual Property Rights Are a Power to Stop Other People from Exercising Their Own Property Rights; the Law of Copyrights and Patents Violates the Very Rights Locke Defended

This means that IP rights are not property rights, but are in fact a power to stop other people from exercising their own property rights. If I own a copyright in a book, I can use the force of government to stop someone from using their own paper and ink to produce their own copies of the book. If I own a patent on an invention, I can use the force of government to shut down someone else’s factory that produces copies of my invention, even though the other person is using his or her own equipment, machinery, and components. I can even do this if the other person is not using a ‘‘copy’’ of my invention, but independently invented it all on his or her own. For a libertarian, this is unjust because it is using aggressive force against peaceful people. As law professor Tom W. Bell has put it:

By invoking state power, a copyright or patent owner can impose prior restraint, fines, imprisonment, and confiscation on those engaged in peaceful expression and the quiet enjoyment of tangible property. Because it thus gags our voices, ties our hands, and demolishes our presses, the law of copyrights and patents violates the very rights Locke defended.

So according to libertarian theory, IP rights are not ‘‘property rights’’ at all, but are a government-issued license to attack property rights—and therefore should be abolished.

Rand’s attempt to justify IP fails under this framework because it presumes that ownership of ideas is possible and legitimate. So does Rothbard’s attempt to ground IP in contract. We can see why by comparing Rothbard’s contract-based copyright to a case in which Jones makes a contract with Smith to tell him a secret. A contract to keep a secret, standing alone, is legitimate—people can always make deals to do or not do things. If Smith tells everyone Jones’s secret, Jones rightly can sue Smith because he broke their deal. Jones cannot, however, sue everyone else in the world who now knows the secret to stop them from repeating it; he did not have contracts with those people and therefore cannot claim any rightful ownership over them, the ideas in their heads, or their property. And so it is with copyright: a seller can make his buyers agree not to copy a book, but he may not stop others who happen to see it from doing so. Likewise, an inventor may not stop someone who sees his or her invention (say, a machine) from using this knowledge to make a similar or better machine.

--Jacob H. Huebert, Libertarianism Today (Santa Barbara, CA: Praeger, 2010), 208.

According to F. A. Hayek, in the Field of Patents, Copyright, and Trade-Marks, a Slavish Application of the Concept of Property Has Greatly Fostered the Growth of Monopoly

Although defenders of patents often try to deny that patents constitute monopoly privileges by arguing that the term “monopoly” is inapplicable, such an argument is merely semantic. There is no contradiction or incompatibility between the notions of “patent as property” and “patent as monopoly,” and, in practice, they are closely related, since the monopolistic nature of patents is precisely what confers economic value upon them. According to Sigmund Timberg:

A patent serves a fourfold purpose. Viewed morally and socially, and perhaps psychologically, it is a reward for unusual inventive ability. From the standpoint of economics and commercial law, it is a property right. Neither of these purposes—the reward to the inventor or the creation of a property right—have any restrictive economic effect in and of themselves. But then we come to the patent’s third phase—from the vantage point of the state, a patent is a grant of a monopoly to the inventor based on the public interest in promoting the growth and diffusion of technology. It is the monopoly grant that makes tangible the inventor’s reward and converts a formal into a realistic property right. Moreover, the monopoly grant has a prima facie impact on trade, because the monopoly conferred by the patent is the right to exclude others from manufacturing or selling the patented product, or from practicing the patented process.

Hayek argues:

The problem of the prevention of monopoly and the preservation of competition is raised much more acutely in certain other fields to which the concept of property has been extended only in recent times. I am thinking here of the extension of the concept of property to such rights and privileges as patents for inventions, copyright, trade-marks, and the like. It seems to me beyond doubt that in these fields, a slavish application of the concept of property as it has been developed for material things has done a great deal to foster the growth of monopoly, and that here drastic reforms may be required if competition is to be made to work. 

--Julio H. Cole, "Patents and Copyrights: Do the Benefits Exceed the Costs?" Journal of Libertarian Studies 15, no. 4 (Fall 2001): 81-82.

Intellectual Property Rights Are Difficult to Justify under the Humean Economic Theory of Property Since These Rights Do Not Arise from Scarcity; Instead Artificial Scarcity Is Created by the Law

Although the term “intellectual property” is commonly used in the legal field, it is rather problematic in economics, since it is difficult to justify this type of property right with the same arguments that are used to justify private property in tangible goods.

According to the economic theory of property (following David Hume), society benefits from the delimitation and protection of private property rights because goods are scarce. There is no point in defining property rights over abundant goods. On the other hand, when goods are scarce and property is communal, they are not used efficiently. Private property guarantees that scarce goods will be put to their most efficient and productive uses.

It is difficult to justify intellectual property rights under this concept of property, since these rights do not arise from the scarcity of the appropriated objects; rather, their purpose is to create scarcity, thereby generating a monopoly rent for holders of such rights. In such case, the law does not protect property over a scarce good, since the law itself created the scarcity, and this artificial scarcity generates the monopoly rents that confer value upon those rights. The big difference between patents and copyrights on the one hand, and tangible goods on the other, is that the latter will be scarce even if there are no well-defined property rights; in the case of patents and copyrights, the scarcity arises only after the property right is defined.

--Julio H. Cole, "Patents and Copyrights: Do the Benefits Exceed the Costs?" Journal of Libertarian Studies 15, no. 4 (Fall 2001): 81.

Justifications for Copyright Protection Have Taken a Mercantilist Turn; The Shift from Neoclassical Welfare Economics to Mercantilist Justifications Defines US Trade Policy for Intellectual Property

Over the last twenty years, justifications for broader copyright protection have taken an increasingly mercantilist turn. In the recent debates over the Protect Intellectual Property Act (PIPA) and the Stop Online Piracy Act (SOPA), proponents did not seriously argue that these measures would enhance welfare by encouraging the production of more and better works of authorship. Rather, they argued that these bills would increase revenues to domestic copyright owners and thereby create jobs. This shift from neoclassical welfare economics to mercantilist justifications for policy is not unique to PIPA and SOPA, however. Rather, it has become a defining feature of United States trade policy with respect to copyright and intellectual property, more generally, over the last few decades. Moving away from the tenets of free trade, trade policy in the intellectual property arena has sought increasingly to protect domestic industries from foreign competition and to ensure thereby more revenue for and more jobs in those industries within the United States.

--Glynn S. Lunney Jr., "Copyright's Mercantilist Turn," Florida State University Law Review 42, no. 1 (Fall 2014): 95-96.

On the Surprisingly Weak Economic Case for Copyright; for 400 Years Copyright Has Been Justified by the Fear That in Its Absence, We Will Have Too Few Original Works

From an economics perspective, the central justification for copyright has changed little since the Stationers’ Guild articulated it to the Star Chamber in 1586. In that year, the Stationers’ Guild wrote:

And further if privileges [that is, copyright] be revoked no books at all should be printed, within a short time, for commonly the first printer is at charge for the Author’s pains, and some other such like extraordinary cost, where an other that will print it after him, comes to the Copy gratis, and so may he sell better cheaper than the first printer, and then the first printer shall never utter [that is, sell] his books.

Almost exactly four centuries later, Professors Landes and Posner offered essentially the same justification, though phrased more contemporaneously:

In [the] absence [of copyright protection], anyone can buy a copy of the book when it first appears and make and sell copies. The market price of the book will eventually be bid down to the marginal cost of copying, with the unfortunate result that the book will not be produced in the first place, because the author and publisher will not be able to recover their costs of creating the work.

In short, for 400 years, copyright has been justified by fear – the fear that in its absence, we will have no, or perhaps more accurately, too few original works.

In the same way, for 400 years, the central limit on copyright has remained equally unchanged. Copyright raises the price of books, music, and other copyrighted works. That higher price simultaneously provides the incentive to create additional original works and limits access to existing works. The search for optimal copyright is therefore thought to entail a search for the optimal balance between incentives and access. . . .

In devising an optimal copyright system, this supposed balance between incentives and access has become the central guide. Too little copyright and we will have too few original works. Too much and we will not be able to enjoy the works we have. Only when we balance incentives and access appropriately, when we have neither too little nor too much copyright, will copyright be just right – or at least, that’s the conventional wisdom.

--Glynn Lunney, Copyright's Excess: Money and Music in the US Recording Industry (Cambridge, UK: Cambridge University Press, 2018), e-book.

What Gives Locke's Social Contract Its Air of Unreality, of Toothlessness, Is That It Is a Reversion to the Old Thomist Idea of Revocability without the Retention of Armed Force in Civil Society

Here lies the crux of the difference between the old Thomist and the new Hobbesian contract; the first deals with a society that has kept its arms, the second with one that has 'chosen' to disarm itself. In the first, resistance to the prince who transgresses natural law takes the form of resort to force or the threat of it. In the second, resistance is unnecessary, but would be impossible if it were necessary. In Rousseau's intellectually weaker, in some ways decadent, quasi-Hegelian version of the irrevocable social contract, resistance to the general will would be tantamount to resisting one's own will, properly understood (the condition of proper understanding being the tautological one that one's own will conforms to the general will). What gives Locke's social contract its air of unreality, of toothlessness, and of placebo, is that it is a reversion to the old Thomist idea of revocability without the retention of armed force in civil society which would make performance by the contracting parties mutually contingent, and resistance to unlawful government meaningful.

--Anthony de Jasay, Social Contract, Free Ride: A Study of the Public Goods Problem (Oxford: Clarendon Press, 1989), 72-73.

"Beggar-Thy-Neighbour" Policies in International Trade Illustrate the Prisoners' Dilemma As Applied to States; the "Dominant Strategy" of Each State Is to engage in Discriminatory Trade Practices

On a less apocalyptic level, "beggar-thy-neighbour" policies in international trade seem to be a perfectly good practical illustration of the prisoners' dilemma as applied to states. Generally speaking, all states could be better off if, by cooperative conduct, they allowed the potential gains from trade to be fully realized, just as all prisoners would be better off if none betrayed the other by confessing. The "dominant strategy" of each state (as the "optimum tariff" argument demonstrates), however, is to engage in discriminatory trade practices, high tariffs, competitive devaluations and so forth. This strategy is "dominant" on the argument that if other states behave nicely and adopt free-trader conduct, the first state will reap advantages from its misbehaviour, while if other states misbehave, it would suffer by not also misbehaving. The supposed outcome of every state adopting its dominant strategy is an escalating trade war with everybody rapidly getting poorer and being unable to do anything about it in the absence of a super-state with powers of coercion. In actual fact, many, states much of the time behave reasonably well in international trade. They either do not have a dominant strategy, or, if they do, it is not to misbehave. Most states most of the time adhere to GATT rules (which stand for the "cooperative solution" in game-theory parlance). Trade wars are generally minor skirmishes, limited to a few products of a few states and instead of escalating as they should, they usually subside. Such "partial free trade" is achieved, just like "partial peace," without benefit of a state above states and the transfer of power to it. Complete free trade, like total peace, may from most points of view be more satisfactory, but the cost of the added satisfaction must appear prohibitive to the participants; states do not willingly submit to domination even if the dominant entity is to be called the Democratic Federation of Independent Peoples.

--Anthony de Jasay, The State, The Collected Papers of Anthony de Jasay (Indianapolis: Liberty Fund, 1998), 46.

The Iterated Prisoner's Dilemma Has Become the E. coli of Social Psychology; the Prisoner's Dilemma Is Used to Model Arms Races, Oligopolistic Competition, Collective Action Problems, Vote Trading, etc.

Since the Prisoner's Dilemma is so common in everything from personal relations to international relations, it would be useful to know how best to act when in this type of setting. However, the proposition of the previous chapter demonstrates that there is no one best strategy to use. What is best depends in part on what the other player is likely to be doing. Further, what the other is likely to be doing may well depend on what the player expects you to do.

To get out of this tangle, help can be sought by combing the research already done concerning the Prisoner's Dilemma for useful advice. Fortunately, a great deal of research has been done in this area.

Psychologists using experimental subjects have found that, in the iterated Prisoner's Dilemma, the amount of cooperation attained—and the specific pattern for attaining it—depend on a wide variety of factors relating to the context of the game, the attributes of the individual players, and the relationship between the players. Since behavior in the game reflects so many important factors about people, it has become a standard way to explore questions in social psychology, from the effects of westernization in Central Africa (Bethlehem 1975) to the existence (or nonexistence) of aggression in career-oriented women (Baefsky and Berger 1974), and to the differential consequences of abstract versus concrete thinking styles (Nydegger 1974). In the last fifteen years, there have been hundreds of articles on the Prisoner's Dilemma cited in Psychological Abstracts. The iterated Prisoner's Dilemma has become the E. coli of social psychology.

Just as important as its use as an experimental test bed is the use of the Prisoner's Dilemma as the conceptual foundation for models of important social processes. Richardson's model of the arms race is based on an interaction which is essentially a Prisoner's Dilemma, played once a year with the budgets of the competing nations (Richardson 1960; Zinnes 1976, pp. 330-40). Oligopolistic competition can also be modeled as a Prisoner's Dilemma (Samuelson 1973, pp. 503-5). The ubiquitous problems of collective action to produce a collective good are analyzable as Prisoner's Dilemmas with many players (G. Hardin 1982). Even vote trading has been modeled as a Prisoner's Dilemma (Riker and Brams 1973). In fact, many of the best-developed models of important political, social, and economic processes have the Prisoner's Dilemma as their foundation.

There is yet a third literature about the Prisoner's Dilemma. This literature goes beyond the empirical questions of the laboratory or the real world, and instead uses the abstract game to analyze the features of some fundamental strategic issues, such as the meaning of rationality (Luce and Raiffa 1957), choices which affect other people (Schelling 1973), and cooperation without enforcement (Taylor 1976).

--Robert Axelrod, The Evolution of Cooperation, rev. ed. (New York: Basic Books, 2006), 27-29.

People Find It Hard to wrap Their Heads Around the Concept that Ideas Can Be Rewarded Without a Copyright or Patent. Without a Copyright, How Will the Author Get Paid?

People find it hard to wrap their heads around the concept that ideas can be rewarded without a copyright or patent. Without a copyright, how will the author of a novel get paid? Consider the facts.

Start with English authors selling books in the United States in the nineteenth century. “During the nineteenth century anyone was free in the United States to reprint a foreign publication” without making any payment to the author, besides purchasing a legally sold copy of the book. This was a fact that greatly upset Charles Dickens, whose works, along with those of many other English authors, were widely distributed in the United States, and “yet American publishers found it profitable to make arrangements with English authors. Evidence before the 1876–8 Commission shows that English authors sometimes received more from the sale of their books by American publishers, where they had no copyright, than from their royalties in [England],” where they did have copyright. In short,without copyright, authors still got paid, sometimes more without copyright than with it.

How did it work? Then, as now, there is a great deal of impatience in the demand for books, especially good books. English authors would sell American publishers the manuscripts of their new books before their publication in Britain. The American publisher who bought the manuscript had every incentive to saturate the market for that particular novel as soon as possible, to avoid the arrival of cheap imitations soon after. This led to mass publication at fairly low prices. The amount of revenues British authors received up front from American publishers often exceeded the amount they were able to collect over a number of years from royalties in the United Kingdom. Notice that, at the time, the U.S. market was comparable in size to the U.K. market.

--Michele Boldrin and David K. Levine, Against Intellectual Monopoly (New York: Cambridge University Press, 2008), 22-23.