The ongoing technology patent wars, apparent abuses by patent trolls, absurd intellectual-property (IP) claims and so on have done at least one good thing: they have spurred growing discussion of the role of IP in law and the economy. A recently released paper by the Mercatus Center at George Mason University entitled “How Many Jobs Does Intellectual Property Create?” looks at some of the claims of IP proponents and argues that the espoused benefits of IP to jobs is overblown. The technology world in particular is subject to these kinds of claims—after all, if rounded corners weren’t patentable, who would invest in designing a smartphone with rounded corners? But IP proponents Mark Schultz and Adam Mossoff (both professors of law at George Mason University) have taken issue with the paper, countering its claims and espousing the economic benefits of IP. So who’s winning the battle?
Beating Around the Bush
One critical shortcoming of the debate over IP (which encompasses patents—usually the more relevant part of IP as far as the technology world goes) is that it ignores the side effects to more-established property rights. For instance, physical-property rights are clearer owing to the scarcity of the goods: a particular car cannot be taken without depriving someone of its use. Abstractions are not scarce, however: no matter how many times an idea is copied, no one’s ability to employ it is diminished. Yet even though ideas are less clear in their status as property, IP law deprives individuals of their freedom to employ their physical property. Thus, someone’s patent can prevent an individual (or company) from using his or her legally owned physical property in certain ways, effectively depriving that individual of true ownership. (Imagine a thief saying, “I’ll just be using your car on Thursday afternoons”; this is no less a theft.)
The matter of whether IP promotes innovation, economic growth and jobs is secondary. If it is primary, then we have fallen into the utilitarian trap that allows all manner of rights violations as long as they are done in pursuit of some “greater good” (i.e., the ends justify the means). Nevertheless, these secondary considerations do have some bearing on the debate, particularly if IP can be shown to be neutral or even a net detractor with regard to economic activity. That’s where the Mercatus Center paper chimes in.
The Broken Window Fallacy
The paper rightly notes that simply because IP-related industries (e.g., smartphones and other technology markets) employ numerous workers doesn’t mean that these jobs—and their associated productivity—would simply vanish if IP laws were struck down. Such thinking is only a short step from the “broken window fallacy” that drives Keynesian economic theory: the notion that even vandalism (or war) stimulates economic growth because it creates work and gets money flowing. But this thinking doesn’t take into account the damage done; for instance, perhaps World War II stimulated productivity in the U.S., but what could all those workers (and dead soldiers) have done to improve quality of life instead of tearing apart the world?
Schultz and Mossoff, citing a 2012 U.S. Patent and Trademark Office (USPTO) report, mention how “IP-intensive industries” accounted for large portions of GDP, higher average wages relative to other industries and a larger fraction of U.S. exports. But these facts don’t bolster IP; the remoras go where the sharks are. IP claims, rather than being drivers of innovation, could simply be parasites that go where the food (money) is. The point here is simply that these facts don’t prove anything with regard to IP. Furthermore, even were a marginal benefit demonstrated, it doesn’t by itself justify IP rights—that is, unless the end justifies the means, which is the foundation of the utilitarian argument for intellectual property. (And given that almost no one argues for perpetual IP rights, proponents are almost invariably utilitarians on this issue.)
A Cure for What Disease?
Schultz and Mossoff do rightly critique the Mercatus Center paper in regard to the authors’ suggestion of possibly using government subsidies to promote innovation. The paper seems to ignore simple demand as a driver for innovation. For instance, would Apple really have scuttled its iPhone project in the absence of IP rights because competitors would copy its designs? Ironically, many consumers still buy name-brand products even though generic products offer the same functions or features. In other words, the first-mover advantage can drive innovation (and there is also fraud law to prevent another company from hawking knock-offs as genuine iPhones, for instance).
To be sure, government subsidies for innovation create a host of problems, and such a scheme may indeed be worse that the current IP system. But that doesn’t mean the obvious alternative—striking down IP laws entirely and letting the economy go where it will—is therefore even worse. Regardless of which approach is better, though, both the paper and its two critics largely ignore this possibility.
According to Schultz and Mossoff, “IP skeptics argue, however, that the U.S. would enjoy even greater prosperity with weaker or no IP protections, but, thus far, they have failed to put forward any substantial body of empirical evidence to support their case.” But what studies show that IP does promote prosperity? And are the detriments to freedoms in the realm of physical property worth a few extra bucks of GDP? If Schultz and Mossoff are asking for empirical evidence in the U.S., particularly in the technology arena, then such evidence will be difficult to come by since IP law is already in place. (The fashion industry might be worth investigating, however.) Perhaps more relevant is presenting a defense of the notion that the end justifies the means—particularly when rejection of this maxim is an exemplar of moral decency.
The paper from the Mercatus Center scholars and the reply from Schultz and Mossoff—regardless of who has the stronger position—is a positive sign simply because it continues the debate over IP. Rather than simply accepting IP laws unquestioningly, greater scrutiny means that either they will be reformed, struck down or strengthened for the debate. But questions of freedom with regard to physical property, as well as the defensibility of “the ends justify the means,” should be a greater focus. GDP is not the highest aim of existence, so focusing solely on the economic and employment benefits of intellectual property is insufficient. Yet doing so could give significant rhetorical weight to one side or the other in this ongoing debate.
Image courtesy of Michael Neubert