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TGIF: Intellectual Property Fosters Corporate Concentration


The modern libertarian case against so-called intellectual property (IP) has been building steadily since the late 1980s, when I first encountered it. Since then, an impressive volume of work has been produced from many perspectives: economics, political economy, sociology, moral and political philosophy, history, and no doubt more. It is indeed a case to be reckoned with. (Roderick Long has put together a web page with links to some of the best anti-IP material written over the last quarter century. My own contributions include “Patent Nonsense,” “Intellectual ‘Property’ Versus Real Property” and “Slave Labor and Intellectual Property.” A brief spontaneous debate that I participated in is here.)

I won’t try to recap the whole case here, but I do want to answer a question that will occur to many advocates of liberty: How can someone who supports property rights in physical objects deny property rights in intellectual products, such as the useful application of scientific principles or patterns of words, musical tones, or colors? Suffice it here to quote from “Patent Nonsense”:

There is a distinction between physical objects and ideas that is crucial to the property question. Two or more people cannot use the same pair of socks at the same time and in the same respect, but they can use the same idea — or if not the same idea, ideas with the same content. That tangible objects are scarce and finite accounts for the emergence of property rights in civilization. Considering the nature of human beings and the physical world they inhabit, if individuals are to flourish in society they need rules regarding thine and mine. But “ideal objects” are not bound by the same restrictions. Ideas can be multiplied infinitely and almost costlessly; they can be used nonrivalrously.

If I articulate an idea in front of other people, each now has his own “copy.” Yet I retain mine. However the others use their copies, it is hard to see how they have committed an injustice.

Practices respectful of private property in physical objects and land emerged spontaneously over millennia, embedded in customs that served to avert conflict in order to create space within which social beings could flourish. (See John Hasnas’s “Toward a Theory of Empirical Natural Rights” [PDF].)

In contrast, “rights” in ideas — patents and copyrights — were government monopoly grants having nothing in common with the notion of property at the heart of libertarianism. In fact, such artificial rights undermine genuine property by authorizing IP holders to enlist government power to stop other people from using their justly acquired resources and ideas. For example, if Jones (having committed no trespass) observes Smith’s invention or artistic creation, Jones could be legally stopped from using his own physical property in conjunction with ideas obtained through that observation. That sure looks as though IP bestows on Smith purported rights over Jones’s tangible property and even Jones himself. One might ask, Isn’t the idea Smith’s? But I can’t see how an idea in Jones’s mind can possibly belong to Smith, even if Smith in some sense had “it” first  — unless Smith owns Jones, an unlibertarian notion indeed.

For details, I urge readers to pursue the links referred to above. Those articles and books address all the relevant issues, including how IP stifles rather than stimulates innovation, and the dead-weight loss of the IP legal process. (Contemplate the inventions and works of art that were produced over millennia without patents or copyrights.) Here I simply want to call attention to the latest article in opposition to intellectual property for what it says about two aspects of the subject that aren’t emphasized nearly enough.

I refer to Butler Shaffer’s “A Libertarian Critique of Intellectual Property.” In his essay, Shaffer writes,

Creativity — like learning in general — is fostered by cross-fertilization and synthesis. We ought to have learned from fundamental principles of biology that reproduction through single-cell division produces little genetic variation. When the life process developed sexual reproduction, the resulting genetic diversity allowed for the proliferation of numerous species as well as intra-special traits that enhanced adaptive capabilities.

Patents and copyrights inhibit the creative process by discouraging the exchange of information relating to a particular line of research or exploration. If one scientist has been issued a patent for his invention of a widget, another scientist would likely be discouraged from continuing his own work on a similar product, or from making modifications or variations on the patented item. The interplay in which individual insights and proposals are communicated to one another in a group, and then subjected to collaborative processes of brainstorming, are far more productive of creative ends than is the work of individuals in isolation. Likewise, the cross-fertilization of ideas, techniques, and other influences, among communities of artists and scientists, have greatly enhanced the creative process. On the other hand, when driven by the rewards of patents, scientists and inventors are known to maintain secrecy in their laboratories and research, lest a competitor gain insights that might advance their own work. The proposition that knowledge and ideas can be made the exclusive property of one who discovers or expresses what was previously unknown, is contrary to the nature of the intelligent mind, whose content is assembled from a mixture of the experiences of others and oneself. Even the language with which one formulates and communicates his or her understanding to others, has been provided by predecessors.

As one can see, IP strikes at the very heart of the social-intellectual process that makes all aspects of progress possible. Government impediments to the free flow of information undermine the very dynamic of an advancing civilization.

The other notable point in Shaffer’s essay concerns how IP tends to concentrate wealth in large business firms. He writes,

There are many other costs associated with IP that rarely get attention in cost-benefit analyses of the topic. One has to do with the fact that the patenting process, as with government regulation generally, is an expensive and time-consuming undertaking that tends to increase industrial concentration. Large firms can more readily incur the costs of both acquiring and defending a patent than can an individual or a small firm, nor is there any assurance that, once either course of action is undertaken, a successful outcome will be assured. Thus, individuals with inventive products may be more inclined to sell their creations to larger firms. With regard to many potential products, various governmental agencies (e.g., the EPA, FDA, OSHA) may have their own expensive testing and approval requirements before new products can be marketed, a practice that, once again, favors the larger and more established firms.

Increased concentration also contributes to the debilitating and destructive influences associated with organizational size. In addressing what he calls “the size theory of social misery,” Leopold Kohr observes that “wherever something is wrong, something is too big,” a dynamic as applicable to social systems as in the rest of nature. The transformation of individuals into “overconcentrated social units” contributes to the problems associated with mass size. One sees this tendency within business organizations, with increased bureaucratization, ossification, and reduced resiliency to competition often accompanying increased size. Nor do the expected benefits of economies of scale for larger firms overcome the tendencies for the decline of earnings and rates of return on investments, as well as the maintenance of market shares following mergers. The current political mantra, “too big to fail,” is a product of the dysfunctional nature of size when an organization faces energized competition to which it must adapt if it is to survive.

Indeed, as Kevin Carson documents in Organization Theory: A Libertarian Perspective (PDF), patents were one of the critical elements permitting the unnatural growth of key firms and the concentration of political-economic power during the second half of the nineteenth century. (Tariffs [“the mother of trusts”], banking regulation, land policy, and transportation subsidies were other key factors.) Carson writes,

Without the combined influence of tariffs, patents, and railroad subsidies in creating the centralized corporate economy, there would not have been any large corporations even to attempt trusts in the first place. The corporate transformation of the economy in the late 19th century — made possible by the government’s role in railroad subsidies, protectionism, and patents — was a necessary precondition for the full-blown state capitalism of the 20th century.

For further details, see also Michele Boldrin and David K. Levine’s Against Intellectual Monopoly, especially chapter 4 (PDF).

The technological revolution has been dramatically lowering the price of capital goods, making competitive, small-scale, nonhierarchical enterprises by independent individuals and peer groups more feasible than ever. This is truly a new industrial revolution. Yet we know that entrenched business interests, fearing the loss of market share and profits, will use state power through IP law to crush this potential for widespread economic secession from the corporate state.

Support for freedom and independence, then, requires opposition to intellectual property.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.