*There is one naughty word in the following article.
It has been demonstrated to my satisfaction, and to the satisfaction of a growing number of libertarians, that the concept of a property right in an idea, whether that idea be a process, a pattern or anything else, is nonsensical. It is just as clear that, from a practical perspective, patents and copyrights hamper economic progress. Intellectual property, then, is revealed to be first an absurdity and second an utter failure. It is philosophically and practically incorrect and wrongheaded.
The debate would seem to be over, at least among libertarians. Except that it is not, for reasons probably related to that observation by Max Planck that science progresses funeral by funeral. It is disheartening to see libertarians, long known for their dispassionate, logical approach to ideas and argumentation, digging in their heels in defense of a defunct belief when the arguments in favor of that belief have been overwhelmed, shattered and dispersed by a tsunami of reason. Do we not see statists defending their beloved Leviathan in the same manner, long after the absurdity and complete impracticality of government is demonstrated to them?
If the inescapable fact that an intellectual property right must necessarily infringe on any property rights held in physical things – if, in other words, intellectual property and real property rights obey Fermi-Dirac statistics and cannot occupy the same quantum space at the same quantum time – and if the unavoidable conclusion that not only was intellectual property not needed, but rather acts as a restraint on innovation and investment, do not sway the libertarian to the sensible position, there is perhaps another approach that might do the trick. I would like to offer a broad argument that there are theoretical reasons why intellectual property necessarily restricts economic growth, that the observed curtailment of human endeavor that has historically accompanied grants of monopoly on ideas – for monopolies they most certainly are – is not an accident and no amount of tinkering could ever overcome that.
Profits beyond a base interest rate of return do not exist in equilibrium, what Mises called the evenly rotating economy. Profit opportunities arise sporadically and are transitory. A population's taste shifts, or a new technology offers exciting new consumption possibilities. Perhaps a hurricane destroys a supply line or a production site. In response, the economy will adapt itself to the new reality and things will balance out.
The price system makes this all possible. If I employ resources along line A and realize a 5% profit on my investment, I will abandon line A when and to the extent that 1) another line of production offers a higher rate of return, 2) I can transfer and/or allocate resources at a cost that makes it feasible and 3) I have the know-how to produce in this new line, call it B. If B offers an 8% return on my investment, due either to an increase in demand or a decrease in supply, I will allocate resources to it until the increased demand on its factors of production and increased supply of the end product adjust its profit margin to equal the profit margin made on line A, which now sees a reduction in demand for its factors of production as well as a reduction in the supply of its end product. The market has returned to equilibrium and the consumption of the general populace is best satisfied. Before there was a paucity of line B products to consume, but now the amount of B products has increased at the expense of A products, which consumers, by their spending choices, have demonstrated themselves willing to forego, at least to some extent, in favor of getting more B. Until our productive capabilities expand, we are doing the absolute best we can manage with what we have.
This process is interrupted by a monopoly, for it depends on the competition of outside sources to drive it. Consider a population with a million members willing to pay at least $1 for a widget. A single provider selling this widget could gross $1 million. But what if a hundred thousand of those million were willing to pay at least $20 for the widget? By restricting the supply, a single provider could gross $2 million, and quite possibly cut production costs – like labor – as well (although there is admittedly also the possibility of sliding back down into a less advantageous economy of scale).
A monopoly allows a provider to act on incentives to reduce output, to scale back his efforts in the fight against scarcity. Since the entire point of economic activity is to move from greater to lesser scarcity, to get as close to abundance as possible, any argument against impediments to the evenly rotating economy ought to be just about the least controversial thing ever.
Monopolies are verboten for the libertarian. What is government itself, if not a monopoly? In a more honest age, patents and copyrights were called just that: monopolies. The behavior of the monopolist is to restrict production so as to be able to charge a higher price without leftover product.
In a free market, this higher price would attract investment and output would expand until the balance that best satisfies the general populace was achieved. A monopoly prevents this. No one else is allowed to produce the patented/copyrighted – the monopolized – good, and the monopolist himself will produce only up to the point where the product of the price paid times the quantity sold is at its apex.
It should be obvious from this that a copyright or patent does not induce creativity and production, but restricts it. And it should be obvious why this will always be so. But this is not the end of the problem.
The consumer may also be denied much of what might be called the spillover effects from monopoly. By this I mean the extra investment that occurs outside of the monopoly, due to the investment that will not take place within it. Widgets may be restricted and therefore command a high price, but at least, then, there is the small compensation of an increase in wadgets, is there not? Surely all the investment that would have expanded output of widgets absent the monopoly can at least be used to give us more wadgets. We might prefer a few more widgets to a few more wadgets, but a few more wadgets is better than nothing, right?
Unfortunately, this is not necessarily the case. For one, greater investment in wadgets will drive up demand for their factors of production, as well as the supply of wadgets, which will narrow profit margins. With these profit margins narrowed, investment of any sort becomes less attractive, whether it be investment to expand output or investment to improve and modernize the production process. Instead, more money will be invested in the monopolized industry, not to expand production, but to instill a sense of need for the product in an attempt to make the demand schedule more favorable for the producer. Anyone who, between the extra point conversion and the ensuing kick-off, has witnessed seven straight pharmaceutical advertisements aimed at clearing your arteries, curing your depression, lowering your cholesterol, reducing your allergies, alleviating your dementia, controlling your bladder and making your dick stiff has seen this strategy in action.
The reader may well ask why should the consumer be king? Why not let the producer be king and let consumers serve the whims of the producer? After all, every man is both at various points in his life. The man who eats a steak as a consumer is the same man who bought the steak with money he earned as a carpenter, i.e., as a producer. Why should it matter at which point he serves and at which point he is served, so long as the same rules apply to every man?
The answer to that lies in the very nature of economic activity itself. Humans act, a fact the reader has proven true by reading this article; a fact he will further prove true if he disagrees with it. A person must employ scarce resources to achieve his ends, those ends being the subjective improvement of his state (as opposed to the improvement of his State, which is largely a waste of time). From this we see that production and everything that goes into it are means by which we achieve our ends. Consumption is the end, the goal. It is out of a desire to consume that we produce; there is no desire to produce that leads us to consume. Production is therefore subordinate to consumption and would not occur without consumption's allure.
To grant a monopoly is to grant the privileged recipient a position as a producer which he should only hold when it is his turn to consume. It is to sacrifice the ends for the sake of the means. It is to turn traitor to the human race and side with scarcity over abundance. Copyrights and patents are monopolies. Therefore, I must conclude that anyone who fights for intellectual property is waging a war against the human race, whether he realizes it or not, and any libertarian who supports it is only a part-time libertarian.