Creativity and Property Rights

1 February 2013 at 2:32 pm 14 comments

| Peter Klein |

I haven’t been following the Cato Unbound debate on US copyright law, but Adam Mossoff directs me to Mark Schultz’s post, “Where are the Creators? Consider Creators in Copyright Reform.” Mark thinks current debates over copyright law neglect the role of creativity: “Too often, the modern copyright debate overlooks the fact that copyright concerns creative works made by real people, and that the creation and commercialization of these works requires entrepreneurial risk taking. A debate that overlooks these facts is factually, morally, and economically deficient. Any reform that arises from such a context is likely to be both unjust and economically harmful.” Adam thinks Mark’s position “calls out the cramped, reductionist view of copyright policy that leads some libertarians and conservatives to castigate this property right as ‘regulation’ or as ‘monopoly.'”

As one of those libertarians critical of copyright law, but also an enthusiast for the fundamental creativity of the entrepreneurial act, let me respond briefly. Mark is certainly right that creative works are created by individuals (not, “discovered,” as some of the entrepreneurship literature might lead you to believe). But I don’t see the implications for copyright law. The legal issue is not the ontology of creative works, but the legal rights of others to use their own justly owned property in relation to these creative works. Copyright law is, after all, about delineating property rights, and whether legal protection should be extended to X does not follow directly from the fact that X was “created” instead of “discovered.”

Mark uses the language of entrepreneurship, and I think this argues against his conclusion. Property law protects the property of the entrepreneur, and the ventures he creates, not the stream of income accruing to those ventures. Suppose Mark has the brilliant insight to open a Brooklyn-style deli on a street corner here in Columbia, Missouri, makes lots of money, and then I open a similar shop across the street, cutting into his revenues. No one would argue that I’ve violated Mark’s property rights; the law rightly protects the physical integrity of Mark’s shop, such that I can’t break in and steal his equipment, but doesn’t protect him against pecuniary externalities. The fact that Mark’s restaurant wouldn’t have existed if he hadn’t created it — that “real people make this stuff,” as he puts it — has no bearing on the legality of my opening up a competing restaurant, even though this harms him economically.

Likewise, if I write a book, and Mark makes a copy without my permission, he may have reduced my income stream, but he doesn’t “steal” my book — I still have the original. The thorny issue in these debates over copyright is whether my underlying idea — the thoughts that are expressed, in a particular way, in that book — constitutes “property” that deserves legal protection. I’ll state for the record that I think ideas are not property per se, and that preventing Mark from copying my book is a violation of Mark’s property rights. But wherever one comes down on this issue, the fact that the book resulted from a creative act — that it wouldn’t have existed if I hadn’t exercised my creative faculties, worked hard, and so on — does not, it seems to me, have any particular implications for copyright law. Creative things are created by real people, but it doesn’t follow that all created things warrant legal protection.

Entry filed under: - Klein -, Classical Liberalism, Entrepreneurship, Institutions, Law and Economics. Tags: .

Arrunada Seminar: Corrado Malberti – What could be the next steps in the elaboration of a general theory of public registers? Arrunada Seminar: Benito Arruñada – Underprovision of Public Registries?

14 Comments Add your own

  • 1. libertarianmindset  |  1 February 2013 at 4:14 pm

    I completely agree. As Kinsella points out, it always also comes down to scarcity. Scarcity is the reason we need property rights in the first place. It leads to interpersonal conflict over excludable goods. Two people cannot use the same good exclusively at the same time. Without scarcity we do not need property rights. When it comes to ideas, you using my idea doesn’t hinder me from using that same idea simultaneously. Whereas, you using my pencil stops me from using my pencil at the same exact time.

  • 2. henrymoore  |  1 February 2013 at 8:12 pm

    IP proponents are right. You can’t have this debate and ignore creative entrepreneurial risk taking. But that’s the impression I have sometimes gotten that they are doing! If everyone fears a lawsuit from a copyright holder (if they are right that copyrights are legitimate then they should be much more widespread, and should apply to every single idea or pattern, not just those recorded in certain media), then obviously they are not going to take the risk to create their own work that might resemble (or God forbid actually steal an idea from!) someone else’s work. IP proponents are the real stiflers on entrepreneurial vision and new creations. Not the other way around.

  • 3. Richard O. Hammer  |  3 February 2013 at 5:55 pm

    But all this seems to assume that law (law pertaining to intellectual creations in this case) rests properly in the hands of some benevolent state. This debate assumes that law as imposed by the state can and should be shaped by wise arguments from educated folk such as we are. On the contrary I propose that an education in the history and origins of law (see Bruce Benson, “The Enterprise of Law”) shows that law is better created by markets. If markets are better than states at determining the price of beans, so are markets better than states at determining the rules of copying.

    What if there is a contract? What if you buy a book for a discounted price with the promise that you will not copy it? What if enforcement of this contract is left up to free-market adjudicators?

    I have presented this argument a few times, available on freenation.org. “Intellectual Property Rights Viewed As Contracts” , and the PowerPoint slides presented at an Austrian Scholars Conference .

    I have a challenge for those who argue against any form of intellectual property. Would these people publish all secrets? Will they publish, free for all, usernames and passwords for their blogs? Or is there perhaps something in nature which amounts to intellectual property?

  • 4. Peter Klein  |  4 February 2013 at 6:41 pm

    @Rich, my argument has nothing to do with contractual arrangements to protect secrets. You can sell me a book under the requirement that I not make an unauthorized copy. If I make the copy, I’m guilty of breach of contract. IP is only relevant in cases involving third parties not bound by the contract. I.e., if Nicolai sees my book lying around and makes a copy, he isn’t guilty of any contractual violation. The question is whether the law should restrict the actions of people beyond what they’ve agreed to in contracts.

  • 5. stevepostrel  |  5 February 2013 at 5:37 pm

    The deli example in the post is quite interesting. Peter invokes the “pecuniary externality” construct, suggesting that blocking imitation here would reduce economic efficiency (in a neoclassical Hicks-Kaldor sense).

    I wonder, though, whether that would be empirically correct. Perhaps it is precisely the lack of appropriability of this innovation that prevents Columbia from enjoying a fine Brooklyn deli, because each potential entrant weighs the odds of failure against the upside and reasons that imitation makes the upside too small to justify the gamble.

    Suppose, for argument’s sake, that this were the actual state of affairs in Columbia, Mo. Then one could make a few different arguments to justify the lack of IP in local restaurant-concept innovation:
    1) Neoclassically, one could try to show that the parameter space where IP would be economically efficient was either theoretically non-existent or empirically irrelevant. In other words, lost innovations due to lack of IP were of low value compared to improved ex post competition in those business concepts that did get implemented (and also compared to the incremental innovations that would otherwise be suppressed by IP). We could call this the “garment/fashion industry” argument.
    2) From a narrow economic public-choice perspective, one could argue that allowing this type of IP would open the door to pervasive cartelization and rent-seeking even if the blackboard neoclassical analysis looked positive.
    3) From a classical-liberal (or broad public-choice) perspective, one could argue that the freedom to copy a commercial concept was inextricably associated with other vital freedoms that could be subverted by allowing such amorphous IP to be awarded.

    Two arguments that I think could not be made under these hypothetical conditions are propounded above–that non-excludability means there cannot be a property right and that engendering entrepreneurship requires one to be able to knock off any good idea we see.

  • 6. Peter Klein  |  5 February 2013 at 6:38 pm

    Steve, these are interesting points, but I don’t quite understand your last paragraph. First, I was talking about non-rivalry, not non-excludability. Second, I was not making an efficiency argument, but a normative one about the nature of property rights. Sure, one can construct any number of arbitrary models in which a legal rule preventing X from doing Z — call that a property right if you like — increases some measure of social utility or wealth, but I wouln’t consider such models particularly actionable. Anything can be a “property right,” in the positive, neoclassical sense of a restriction on somebody else’s action, but that’s hardly a justification.

    Anyway, the post isn’t about that, but the fact that the ontology of the created thing has nothing to do with whether it merits legal protection. That’s all I was saying, and trying to illustrate with the deli example.

  • 7. stevepostrel  |  5 February 2013 at 6:53 pm

    Peter, I agree 100% that the ontology issue is irrelevant. I was pushing speculatively a little harder to get a better understanding of why your (and my) intuition might be correct that the hypothetical deli shouldn’t be able to restrict imitators. (Good catch on non-rivalry vs. non-excludability.)

    It isn’t that trivial a question; a respected senior colleague once suggested to me that the biggest barrier to economic progress we have is that important innovations such as the newspaper or the supermarket receive no IP protection, while relatively trivial technological advances do. I don’t agree with that perspective but it’s interesting to unpack why and your deli example presented a good platform. For sure, ideas like these are not only “actionable”; they already exist, e.g. business-process patents. We’re just haggling over the details at this point.

    As far as your “normative” but not “efficiency” argument, I don’t get what that distinction means in this case. If you mean some kind of non-consequentialist norm, OK, but my points 2) and certainly 3) would mostly cover those even though they’re stated in consequentialist terms. Sorry if I misunderstood your point.

  • 8. Klein, Peter G.  |  5 February 2013 at 6:55 pm

    Well, I agree with you that these larger questions are really difficult. I wish I had easy answers! Probably my ramblings in the post and comments are indicative of just how hard these problems are.

  • 9. Richard O. Hammer  |  6 February 2013 at 2:51 am

    Peter,
    In my article I offer formulations about how free markets might deal with the question of third-party copying. If the industry of insurance were deregulated, then insurance-entrepreneurs would be free to offer discounts on property-protection policies to customers who promised to help keep the costs of insurance claims down. That is, customers who promised to respect the property rights of other customers would get discounts. Most customers would be eager to get these discounts, and thus most would find themselves bound by the business interests of a larger community to respect property rights as determined in that larger-community process.

    Furthermore, one who gets his imagination out of the context of government-enforced law can see that contracts for low values, such as the value an author may lose in the copying of his work, might find much more effective enforcement in private law, as I formulated in my article.

    I do not believe I can insert a link in this interface. But if you should want to see that article, it is on the website freenation.org, in the archive. Titled “Intellectual Property Rights Viewed As Contracts”.

  • 10. Peter Klein  |  6 February 2013 at 7:05 am

    A clever solution! Do we see anything like this in places where state IP enforcement is weak, like China?

  • 11. Richard O. Hammer  |  6 February 2013 at 11:09 am

    Peter, I do not have any special knowledge of IP protection within existing states. I have emphasized a different subject: the (private) policy that might exist where owners of a critical mass of resources had decided to turn away from the distortions of state-enacted law.

  • 12. Mark Schultz  |  11 February 2013 at 4:39 pm

    I’m rather late to this discussion of my CATO Unbound post, having just stumbled upon this. I appreciate Peter highlighting my work.

    Nevertheless, I wanted to address something Peter says:

    “The thorny issue in these debates over copyright is whether my underlying idea — the thoughts that are expressed, in a particular way, in that book — constitutes “property” that deserves legal protection. I’ll state for the record that I think ideas are not property per se, and that preventing Mark from copying my book is a violation of Mark’s property rights.”

    Well, we almost, sort of agree. Copyright does *not* protect ideas. Never has. Never will. Never should. I have to run off shortly to spend one of several hours in my copyright class that helps students to understand how the law distinguishes between protectable ideas and un-protectable expression.

    I’m not being pedantic here. The legal doctrine matters, because it defines the scope of the property right. As a legal scholar, I find this to be a source of frustration because I a good portion of the opposition to copyright among economists, communication scholars and others is justified by referring to monopolies on ideas. Sorry, that’s just plain wrong.

    Copyright is a pretty narrow property right. I *can* use the underlying ideas in your book. If you establish a new genre, I’m free to jump in–just go to the Young Adult section of the bookstore to see all the books about young wizards and sci fi with kids engaged in life and death games. Neither J.K. Rowling nor Suzanne Collins can prevent these books from popping up like mushrooms (as they have) no more than your hypothetical deli owner can prevent fair competition.

    Now, none of this addresses the never-ending debate about rivalry and non-rivalry. My CATO post didn’t go there. It was directed mostly at the political rhetoric of the debate, reminding participants that people’s expression is created, not found.

    I’ll just say briefly that I think that the copyright owner deserves to retain the fruits of his labor, properly delineated as expression, conditioned on all the many exceptions and limitations that copyright imposes, just like any other property right. That qualified, but essential right, is a lot more limited than many critics allow.

    By the way, that hypothetical deli owner can prevent the other deli owner from misappropriating his goodwill and customers through deception, fraud, and use of trademarks likely to cause confusion. The deli owner has rights in intangible property just like the copyright owner. The deli owner has a limited right in his customer base and goodwill, but it is, like the copyright owner’s right in expression severely restrained. Nevertheless, it’s real. The law prevents the rival deli owner from exercising his essential right to free expression and his (allegedly superior) tangible property rights to erect a sign that says Schultz’s Deli.

    Now, I must go teach the very real, but admittedly challenging, distinction between ideas and expression.

  • 13. Peter Klein  |  11 February 2013 at 4:58 pm

    Mark, thanks for the comment. I certainly do recognize the distinction between ideas and expression. Note that in the passage you quote I ask if “my underlying idea — the thoughts that are expressed, in a particular way, in that book” — merits legal protection. Perhaps my wording was clumsy, because I thought the phrase between the dashes made it obvious that I was talking about expression, and that the word “ideas” in the subsequent sentence refers to expression. So let me clarify: “I’ll state for the record that I think particular expressions of ideas are not property per se, and that preventing Mark from copying my book is a violation of Mark’s property rights.”

    Of course, I hope it’s also obvious that I was talking throughout the post on what I think the law should be, not what the law currently states. To be sure, copyright law gives limited protection to expression of ideas, as Mark nicely explains. I’m saying that, from a libertarian economist’s point of view, it shouldn’t.

  • 14. Bob Robertson  |  4 April 2013 at 8:49 pm

    Ok, can we agree that “rights” are inherent to an individual? So, for example, the govt does not grant me my freedom of speech, it is merely prevented from interfering with it.

    Eliminate the statutes that create “intellectual property”. What happens?

    Copying by itself ceases to be a crime. Building on other’s ideas ceases to be a crime. And, in my opinion, that’s it.

    To claim to have invented something, to claim to have written something “first”, these are factual claims and are either true or false, and if false can be prosecuted for fraud if used to defraud people.

    Our society has a standard that if someone comes up with an idea, using that idea without attribution is “wrong”, but it’s not wrong to use the idea. It doesn’t matter if it’s legal to do so or not, and that “social standard” remains without the statutes.

    I think people would do just fine without the statutes. No one is going to claim to have invented the lightbulb even if it’s not patented. No one is going to claim to have written MacBeth, even if Shakespeare’s copyright isn’t enforced. The fact that both of these are completely out of their “Intellectual Property” protection and are not being abused merely demonstrates my point.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Authors

Nicolai J. Foss | home | posts
Peter G. Klein | home | posts
Richard Langlois | home | posts
Lasse B. Lien | home | posts

Guests

Former Guests | posts

Networking

Recent Posts

Categories

Feeds

Our Recent Books

Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).

Follow

Get every new post delivered to your Inbox.

Join 276 other followers