Rethinking Intellectual Property: History, Theory, and Economics

0:00Stephen Kinsella, it's a pleasure to have you here today. Welcome. Thank you. Good to be here. So we're going to talk about your class for the Mises Academy on intellectual property. Yes. I'm looking forward to it. We've been planning it for quite a while, as you know. And I think the first course will be on November 1st, six weeks, and we'll take a week off. And we will have time to go in depth into many of the issues about intellectual property and its relationship to libertarianism, economic theory, and various other areas. So why is this an important issue? Well, it's becoming a more and more important issue as we've seen in our circles and as seen on the internet daily.

0:52We see horror stories and crazy examples of abuses of IP, and people are starting to wonder if it's really an abuse of IP or if there's something wrong with IP itself. And in the past, economists or free market economists and libertarians have sort of given this issue a pass. They've sort of taken it for granted. It's been in a corner all by itself. And now people are wondering, and as we start looking more closely at it, we can see that a lot of the assumptions about IP have been wrong. Right. Well, it's striking you mention the history of thought here and why this issue is sort of crystallizing in our time, and especially with your pioneering monograph book on that subject against intellectual property. But, you know, it's generally true, isn't it, that that theoretical The theory of money and credit was made necessary by the advent of central banking, for example.

2:07So 50 years ago, IP wasn't that big a deal. Yeah, I think that's completely true. I mean Mises said something I've always loved. Everyone focuses on a few of his statements that other people don't see because he's got so many great little aphorisms and things. But one thing he said I've always loved was he pointed out that in his view, economics is purely deductive reasoning from a priori sort of categories, right? Plus, then you explicitly introduce certain assumptions to make it interesting. Interesting was something that I always focused on. So in other words, we could talk hypothetically about a barter society forever, but it won't get us that far. So let's introduce the assumption that, okay, let's assume there is money in society.

2:54Once you assume that – now, that's not a priori that there is money, but there could be money, and if there is, then certain things follow from it. So I think likewise in libertarian theory, certain things become interesting at a certain point. And now, I think in the past, there was – as you mentioned in your talk yesterday here at the Supporters Summit, it was not as easy as it is now to replicate information. So there was sort of a tie in previous times between a good that was produced like a book, let's say, and the information in it. The information in the book was in the physical copy of the book, so you could easily find a way to sell that.

3:40But now with information being so easy to copy, and of course, as Cory Doctorow mentions in one of his articles and speeches, do we think we're going to get to a point where it's going to be less easy to copy things? Is it going to get harder to copy and to spread information? No, it's only going to get easier. So these things have made people have to confront the issue of the morality and the politics of sharing information. It's not only a technological advance. It's also dramatic changes in policy that have occurred over the last 15, 20 years. Yes. Copyright and patent keep getting worse. The Western countries are twisting the arms of emerging economies like China to adopt draconian Western-style intellectual property.

4:31This ACTA, this treaty that's coming up is terrible. It probably will be passed, and it will impose protections around the world similar to what we have in the US and the DMCA, Digital Millennium Copyright Act. Act. Is this enforced by the so-called World Intellectual Property Organization? The WTA will have a role in it, yes. The WTA is a World Trade Organization and the WIPO is the World Intellectual Property Organization. I'm not sure their relationship to this. But it's a UN organization, so you've got really kind of an international teeth growing here. Correct. Right. And a prospect for unbelievable abuse and you know what's striking about this? To me, here you have a sector of vast state expansion and imposition on individual liberty, and it's occurring in the name of property rights.

5:28This is what is striking when you start looking at this. You'll see that even libertarians for a long time have regarded patent and copyright as types of property rights. So they sort of assume that this is part of the property rights panoply we should respect. It's in the American Constitution. I should say I always assume that too, unquestioned really. But when you look at the history of it, I mean copyright, the origins of copyright lies in censorship, literal censorship. Basically, they were afraid of the menace of printing because now the church and the government couldn't control so easily the distribution of what thoughts were officially to be promulgated to people. So the roots of copyright is in censorship, literally, and the roots of patents. This is something I'll mention in the speech at the Supporters Summit, and I was mentioning to you the other day.

6:20But ironically, the origins of patents are in piracy, literally in piracy. Nowadays, you hear the defenders of IP attack so-called pirates. And of course, as you and I have discussed, they're not pirates at all because real pirates kill people and break things and take things from you, make you worse off. IP pirates don't do that. Well, one of the original uses of what's called a letters patent was a grant to – I don't want to call Francis Drake sir. He was a slaver after all. Francis Drake became a privateer, which is nothing but a legalized pirate. He went around the world using these letters patented by the Queen of England to plunder and to steal and to bring the treasures back home.

7:10He was literally a pirate authorized by a patent. So patents and piracy do go hand in hand, actually. Now, a lot of this history has been unearthed, again, only recently, because the changes in technology, the intensification of the law have caused people now to look more carefully at the foundations of something that was previously largely unquestioned. Although, Hayek had some passages in his work that were explicitly against copyright and patent. Of course, Rothbard's was against patents. He had a clear statement and views of copyright. They're in favor of so-called common law copyright, which is more or less a free market position.

7:57And Mises provides enough good reason to question the whole idea that you could have ownership and ideas. In fact, I think it's pretty clear that he didn't believe you could own ideas. So you have these strains in the Austrian tradition, and of course it's not only the Austrian tradition that matters here. I mean it's just the Austrians have been the ones that have done the most serious thought about it, right? Yeah, and I do think in thinking hard about this issue myself, I have noticed that having an Austrian background, as usual, helps to see these issues more clearly. Clearly, it's helped me in legal theory and other areas, but here especially. And you can see why Mises, even though he didn't devote a lot of attention to this issue, he didn't go off track too far because his focus on the structure of human action kept him from doing that.

8:50He saw the role of ideas was a guide to human action. It was not the means of action. The means of action are scarce resources, which have to be economized. But Mises saw that human action is guided by ideas. So he glimpsed, although he didn't unfold it too much, he glimpsed that ideas – and as you mentioned in your speech – cannot be destroyed. They can last forever. They're infinitely reusable. – Malable. – Yes, and they're malleable, which also I guess Hayek would see as well with his emphasis on tacit knowledge. – Isn't it great too that Mises says, look, ideas are not phantoms. They're real things. They are things. Yeah, and I think the mistake that is made by – sort of crude philosophizing by a lot of libertarians is they'll say, well, if it's a thing, then it can be owned.

9:38Well, thingness is not the criteria for ownability. There's something else in what – just scarcity or something like that. It's not to denigrate their importance, and a lot of utilitarian-minded people just assume that if you are skeptical about intellectual property, then you are anti-intellectual or you're hostile to the role of ideas. And of course, it's the other way around. Intellectual property hampers innovation. Intellectual property literally imposes censorship on people. It literally prevents you from using knowledge that you have. So basically, getting rid of IP, one of the goals there is to enhance innovation and to enhance intellectual freedom. Yeah, make every industry work the way the fashion industry has managed to live and thrive without IP.

10:28Absolutely. And we're used to that now, although there's always agitation to impose IP even on those areas. Well, sure. And if I were Calvin Klein, I would probably favor it. Absolutely, and that's why we have to get the word out there and inform people. But there has been a great interest in this, and as you notice, whenever we post on this on the Mises blog, it gets some of the most comments. People are just repeatedly fascinated and interested in this issue. So we thought it was time to explore this issue in depth, to go into the history of it, how it emerged, and also just to explain exactly what IP is in the modern law. Most laymen get this confused all the time. I'm a practicing patent lawyer, so I'm always explaining to people, no, that's not a copyright. That's a trademark.

11:13No, that's not a trade secret. That's a patent, because they get these things confused. And it's of course especially bad when you're advocating IP and you don't really even know what you're talking about. But if you want to think about it critically and understand it and even be critical of it, you do need to understand exactly what the legal system is. I think what's wonderful about this topic is not just that it's a topic we need to urgently understand, but to take on the topic of IP helps us think more seriously about the foundations of social thought and economic thought, issues like property, ideas, how society emerges, economic development. And it seems like it's a bridge to understanding in a more vivid way almost every other area of political economy.

12:02I want to focus on the foundations of economics and Austrian economics, so the structure of human action, means and ends, what scarcity means, the role of ideas, emulation, even some of Hayek's knowledge-based arguments. And also in terms of libertarianism, it forces you to clarify your thinking on various other areas such as causation and especially contract theory, where, again, Rothbard was so insightful. And basically between the three thinkers that you mentioned, Hayek and Rothbard, Mises, I think Rothbard of course was overall the best on IP. Unfortunately, he only gave it a little bit of attention. If he had only devoted more attention to it, I mean I think he thought it was a fairly obvious issue. He dealt with it. He put it aside.

12:47Yeah. Again, it was 40 years ago when the issue wasn't that. Right. And I'm sure that if the issue had been more important at the time, he could have devoted more time to it. Because his contract theory leads naturally to a correct view of IP as well. His contract theory is the title transfer theory of contract, which is based upon the work of William Evers. So this idea of contract and Rothbard's really clear idea of what property rights are. I mean Rothbard was one of the first to see that it's a little bit misleading to talk about these derivative rights as independent rights, like the right to free speech. I mean there's a right to property. And so Rothbard, for example, was able to reject reputation rights because he saw that that means owning someone else's brain basically, because that's what your reputation is, what other people think about you.

13:38So Rothbard's clear focus on property rights as the foundational right led him to, say, be clear on reputation rights, which I believe is a type of IP right as well. This has got the same arguments. No, it's all linked. It's all linked, right. It's just a type of intellectual property. It's probably the third worst, I would say, next to patent and copyright. And so Rothbard's contract theory also is crucial to having the proper view of intellectual property because otherwise you come up with these kind of fuzzy contract-based arguments on intellectual property. And unless you view property as – or contracts as transfers of title, which Rothbard did, you cannot reject or respond properly to that kind of argument. Well, here again, it's an area of libertarian thought or political economy in general that people just don't often think about.

14:29You know, it's something you read past, you go, okay, what does it really matter whether you accept this or that view of contract, really? And so, well, it turns out it does matter. One small mistake and suddenly you've got a calamity on your hands. And of course, almost every year, there's some political debate about reforming copyright and patent law, one way or the other. One way or the other, there's agitation to reform it, to improve its efficiency, to maybe reduce the harshness of patent law. But then there's always the pressure to increase the protections, increase the term, impose the acta, make it more worldwide, increase its scope, add IP to fashion. So these debates are always there in the public arena, and we do need to be informed about the morality and the economics of these issues to weigh in.

15:18I worry, too, about the huge thicket that's being created, not just nationally, but internationally, that's going to hamper economic development in the future. I mean, even in the area of software, we've seen how this kind of regulation is causing serious delays in development. Yeah. I mean, that's what it ends up happening, just slowing down development. Of course, if you've consistently enforced IP across the board, you could really, literally bring the whole world to a standstill, couldn't you? Absolutely. There's always pressure for the emerging economies like China, for example, to adopt American-style IP. Now, China is improving more or less as far as we can tell in general. Their property rights are getting better. Their economy is improving. And if they adopt this Western mentality that if they're going to become capitalist, they need to adopt a strong IP system, this could actually impede their growth.

16:16It could trap capital, for example. It could hamper innovation. I should tell you, there's a guy here from China who told me that all this stuff about IP rights in China is designed for consumption of Americans and English newspapers. In fact, one of the major reasons for China's growth right now is the almost practical complete absence of all intellectual property. I was intrigued to hear that. I had a discussion with him as well. He was interesting. He had some good comments, and that's my sense as well. I work for a company that has a Chinese and a Taiwanese operation, and my sense is that they are not really coming along as much as being presented, but they are coming along to some degree, and that does concern me.

17:02But it would be interesting to have – and as part of this course, I may do some more research to expose exactly the role of innovation, say, in China to see how the lack of IP there is helping them too. So we can uncover lots of things in this course. But this is an exciting thing to have a full course devoted to this subject. How many weeks are we going to do? Six. We're going to do six weeks. and it's an example of something the Mises Academy can offer that you can't find in a conventional learning environment at the local university or whatever. You're not going to be able to take a class on IP from anybody who really knows anything. You are one of the acknowledged experts in the whole world on the topic and here you are offering a class for anybody in the world who's interested in learning about it. Now, what if somebody says, well, look, I just don't accept this – Stefan is a well-known radical advocate of eliminating intellectual property. I don't agree with him. So why should I take his class?

17:58Well, he can learn a lot of things about economics, about libertarian theory. He can learn why there's skepticism. Some people can hone their arguments. In the comments threads on the Mises blog, there is repeatedly the same types of questions raised over and over and over and over again. And that's useful and that's helpful, but it's in print and sometimes a personal dialogue. These people can ask their questions, and I can respond in person. Also, we can at least clarify our position because in the mainstream world, there's sort of this idea that people that are opposed to intellectual property are leftists. They're hostile to property in general. So we can at least clarify, no, there is at least a pro-property reason to be opposed to so-called IP for the reason that it is actually – it undercuts property rights.

18:51It infringes property rights. So it will be educational. I will go into the history of it. The history is just fascinating. And if you are in favor of IP, you can at least see all the different arguments offered and maybe find what some of the holes are in your arguments. See what work you need to do. For example, most people at least implicitly have a utilitarian argument for intellectual property, even Ayn Rand. Basically, her argument was utilitarian, which is why she wanted a finite term for copyrights instead of an infinite term. And the utilitarians, they always say that they're in favor of IP because it promotes general prosperity. It promotes innovation, but they never show that it does. If you're really serious with this argument, why don't you do some research?

19:39Research, try to come up with an argument and evidence to establish your case. Tell me how much benefit the economy has from patents and copyrights. What are the costs? What are the benefits? What's the net? Show how you know this. I feel sure that you're going to have people in your class that are taking it, accepting a different conclusion about IP than you do. But I sense that they, too, could benefit and also make a contribution to the overall learning environment. Absolutely. Most – so I would say reasonable people I speak with that I disagree with, when they think hard about these issues, they at least adopt a more reasonable position. They say, well – they agree with you on most of the egregious examples, for example. They say, no, I'm not in favor of that. And if you get them to agree on all these egregious examples, then what they end up being in favor of is a type of IP system that really wouldn't bother us that much.

20:34Any more than a 1% tax would really be something that would be the main issue of the day. Right. So… They imagine themselves as the central planners constructing a certain kind of IP regime actually. Yes. But people that take the course are free to disagree. This is an open forum. This is not an orthodoxy or anything like that. This is my opinion, but I'm going to give a lot of information that will allow people to make up their own minds. This is a tough subject. It's tough. It took me a long time to develop my views on it. I was a I was practicing patent and copyright lawyer at first, and I struggled for maybe a decade to try to find a way to justify it because I assumed it would be justified somehow.

21:36And I kept running into walls, and finally everything fell into place, primarily from Rothbard and Misesian theory. But I found this issue – it is difficult, but once you see it, it's one of these issues that sets people's minds on fire. It frees you to think about other things in different ways. It's like five or six other walls also follow your mind on topics that you already had a view on. And now you can see them in a different light about economic theory and libertarian theory. Well I think back to when I was, I recall reading a book years ago by Michael Novak in which he was discussing economic development and he said the reason why Britain and the US advanced so rapidly was because we had intellectual property and other parts of the world did not. And I read past that and I thought, you know, that's interesting. I don't recall And while reading that elsewhere, I wonder if that's true. Now, this was maybe 10, 15 years ago I read this, but I couldn't quite see what was – where he had gone wrong or if he had gone wrong.

22:47That's a common argument that you hear all the time that part of the empirical evidence for the success of patents is that America has been a successful country. Well, of course, that's reversing cause and effect. It's just looking at correlation, not causation. I mean we had slavery from the beginning. We've had free trade tariffs and regulations. Or maybe it's the Mississippi River that caused… Yeah. I mean of course, maybe we would have been more prosperous without this, for example. In fact, I think we would have been. I think it was a mistake. I mean the founders put this clause in the Constitution, and this is another thing we'll uncover too, which is fascinating.

23:34There's a common assumption that it's in the Constitution, therefore it's a natural right, and it was thought to be a natural right by the founders. Well, of course it wasn't. Even Locke and the founders, none of them believed this was a natural right. Jefferson was great on the topic. They were queasy about this thing, but they'd seen attempts at this in Britain and other things that thought, well, we'll do it for prudential reasons just to encourage innovation. And also it was a – they believe they're establishing it as an individual right rather than a right of the king. So they thought it was a liberalization of English law. Right, democratization of IP or something like that, correct. Institutionalize it, put it in the hands of a bureaucracy rather than at the political whim of a king. Maybe that was an improvement in some ways, but now you institutionalize it, right, and you entrench this system.

24:19But the thing is the founders – and maybe you can't blame them. They were doing a lot at the time. They had a lot on their hands. They made an assumption. They assumed that this would be a net benefit for society. In any case, the laws were not agreed to us back then. They were not. The terms were much shorter. It was like a one-percent tax you refer to. Correct. Yeah. It wasn't that big a deal. Well, look, your class went live a couple of days ago. We were already hit with lots of registrations. Registration. So I know there's a great deal of interest in this. I look forward to the class very much and I thank you for taking your time, being willing to teach the class and being willing to sit down with me today. Thank you very much.