Saturday, 7 January 2017

You have two Chows

Today, I want to look at an issue on which I think libertarian ideas, as they’re often put forward today, are a bit simplistic and weak. I refer to “intellectual property.” But I’ll begin with some scenarios involving real (or not so real) property.

First, an old chestnut. You have two cows. A thief comes and steals one of them.

You’ve lost your cow. But it’s worse. You’ve lost her milk, too. You also lost your future chances of milk from her heifers, or meat from her bullocks. You haven’t just lost property; you’ve also lost the utility, which you could have derived from that property. You deserve recompense from the perpetrator. Don’t you?

Any half way sane justice system will answer “yes” to this. And the compensation should be well more than the value of the property taken. In Roman times, twice the value of the property was considered a norm.

But on what ground is this idea of “property” based? John Locke traced it to the labour expended when someone removes something “out of the state that Nature has provided and left it in.” And he opined that “of the products of the earth useful to the life of man, nine-tenths are the effects of labour.” Or, perhaps, more. Thus, the right to property arises out of the time and effort spent in “mixing your labour” with it. That is, in appropriating it, in improving it, in breeding and herding it, or in earning it by providing goods or services which others are voluntarily willing to buy. As I like to put it, property is life.

So far, so easy. Now I’ll change the metaphor.

You have two Chows – the Chow being the currency issued by your local god emperor. One Chow, let’s say, is enough to keep you, in the style to which you are accustomed, for one week. Your two Chows will allow you to live for two weeks before you need to exert any more of your labour. You don’t need that right now, but you might in future. So you hide them under your bed.

Now a forger comes along. This forger doubles the number of Chows in existence, but creates no new wealth to offset this. So, once the effects have worked themselves through the economy, each Chow is worth only half what it was before.

You still have your two Chows; you haven’t said ciao to either of them. But now you only have one week’s worth of leisure stashed under your bed, not two. You have lost half of the utility of your two Chows. Have you, then, suffered a loss of property, or not? And if so, does the forger owe you compensation for the loss, or not?

The labour that you expended to earn your two Chows is in the past. It hasn’t changed. So, if property rights arise from labour as John Locke tells us, then you have suffered a loss of property, amounting to half of the work that you did to earn them. If the forgery was unofficial, as in a Ponzi scheme, then you might eventually get some small amount of compensation. But if, as is more likely, the forgery was sanctioned by your local god emperor and carried out by his minions, you’ve been Choused.

Obviously, this property idea is more complicated than we thought.

Onwards. Now suppose you have, not two cows or two Chows, but two Dows. That is, share certificates in the Dow (and Jones) Horse Drawn Carriage Company. It’s around 1900, and Dow’s have been trading successfully for 50 years or so. Some German and French madmen have demonstrated “horseless carriages,” but they’ll never catch on. At least, that’s what Dow’s directors think.

You hide these certificates under your bed. A little while later, you are appalled to find that the share price has halved since those palmy days. Dow’s is failing to adapt to the changing market as, for example, Studebaker’s did.

Have you lost property? Some say no; for you still have your certificates. Others say yes; because when you sell the shares you’ll get (if you’re lucky) only half the Chows you paid for them in the first place. You went Dowsing for profit, but you’ve been Doused by the market.

I myself agree with the latter. At the least, you’ve lost some utility. So, do you have a right to claim compensation from Dow’s or their directors?

You may recall a Roman maxim: caveat emptor. Buyer, beware. That, I think, applies in this situation. As a shareholder, if you thought Dow’s was falling behind the market, you should have gone to their AGM and raised a stink. If you didn’t get satisfactory answers, you should have sold your shares – before the drop. Unless there’s been skulduggery, you don’t have any claim against anyone from Dow’s.

Now, to intellectual property at last.

You have two Wows. You’ve composed two songs. You think they’re the best things since sliced bacon. You spent decades educating yourself to become a songwriter, and weeks creating these two songs. You release one, and it starts to sell well. Then someone takes a copy of what you sold them, and starts to sell your song, taking away most of your potential new customers.

Have you lost any of your property? Some say no. You still have the original recording, after all. But you’ve lost the ability to sell your song, and so its utility to you. Through someone else’s willed action, you’ve lost access to the market for one of your Wows. Is that OK?

Some wowsers who call themselves libertarians say there’s no such thing as intellectual property. I disagree. Indeed, to me the case for rights in intellectual property seems, perhaps, even a little stronger than for rights in physical property. For, as the producer of intellectual property, you haven’t just mixed your labour with that property. You’ve gone much, much further; you’ve actually created it. How, then, can it be anything but your property?

Another argument for copyright is that, when you sell something, you have a right to set reasonable conditions on how it may be used. This is so with physical property, too. For example, when you sell a flat in a block, the buyer must agree to certain conditions for the benefit of all the occupants; such as, “don’t take out load bearing walls.” Is it not reasonable, then, for you to impose on the buyers of your Wows a condition that they refrain from doing things with them, which adversely affect your own right to sell them to others?

Lastly, you have two Hows. You’ve put lots of effort into some researches. So, you’ve found what you believe are novel products, or new ways of How to make existing products. You want to exploit this, by providing them for profit. To protect your investment, you go to minions of your local god emperor and ask for a patent – in effect, for a temporary monopoly on the sale of your new product, or of goods made using your novel procedure. Is this OK? Or not?

After reflection, I now see that the patent issue resolves the opposite way from the copyright one. Copyright is a defensive measure. It does no more than prohibit taking away the author’s right of access to the market. A patent, on the other hand, aggressively takes away others’ rights of market access. And this is so even for those who develop a similar product or process independently. Further, the mere existence of a patent in an area can be a disincentive to innovation in that area. Thus I have come to see that copyright is valid (unless misused), but patents are invalid.

Why have I bothered to write this? Because I’m trying to move away from the idea, believed by far too many, that “what the state says is legal is the same as what is right.” Instead, I want to encourage people to use their common sense and logic (their Nous!) to re-visit, from first principles, questions such as whether or not the idea of intellectual property is a valid one.


Derek Bernard said...

I would welcome Neil's further comments on the patent system.

I have been working in the Intellectual Property area, primarily patents, since 1970. My view is that the existence of the system strongly encourages entrepreneurial (i.e. risk-taking) development and innovation; and that that is a Good Thing, whether carried out in the laboratories and workshops of big companies, or in the garage and brain of an individual.

The process of obtaining, maintaining and enforcing such rights is slow, complex and expensive. For sure it could be improved. And it is being slowly improved.

Copying (stealing) someone else's ideas should face a risk of penalties.

Neil said...

Hi Derek,

As I understand it, the patents system - particularly in the USA - has had lots of problems with "patent trolls" buying up patents with the intention to sue people for infringing them. And it's very hard for innocent parties to defend such a suit, so many of them just settle. Bad all round.

Another issue is that when two parties develop the same idea independently at very much the same time (not at all unusual) then whichever of them has the better lawyers will get all the rewards from the idea, and the other will get nothing. (In fact, worse; they will probably land up having to pay a vast sum to the winners).

But my main problem with patents, as I said, is that it enables one party to use the state to restrict another party's access to the market. This is not a problem with copyright, where - as you suggest - those that steal others' ideas should be held responsible for any damage they cause to the originator.