Greenspan Examines the Economics of IP

lilgerry writes "Alan Greenspan is asking some tough questions about the correct balance between rewarding innovators and inhibiting follow-on innovators. There's not many answers here, but there's a hint that there could be some clear economic thinking coming to be added to the discussion. Several good questions raised, and in very precise terms that should get papers published on these topics for years to come."

Comments

raises an interesting point

[Anonymous Coward]

I think Greenspan is a smart guy. He has the moral understanding of Capitalism that he got from Ayn Rand and that lot, but unlike your average ideological Objectivist, he's also pragmatic. He understands that, say, the inefficiency of the federal reserve affecting interest rates is balanced against the short-term chaos and unpredictability of an unregulated money supply.

So what he's saying here is interesting and balances the ideology of "intellectual property" with pragmatic reality. The main point I notice is this:

One key component, a law of contracts, governs the resolution of certain disputes between parties. Yet if adjudication were requested for more than a very small fraction of contracts, our court system would be swamped into immobility and the performance of our economy would suffer. Thus, if our market system is to function smoothly, the vast majority of trades must rest on mutual trust and only indirectly on the law.

To put it another way: free markets are beneficial, we all agree on that. We also most note that free markets are self-organizing. Which means that most people act in a way that supports the existence of a free market. This idea is echoed by Greenspan's statement above.

When 20 million people trade files on P2P networks, they may be commiting an act which is morally wrong according to our present views, but they are merely exploiting a property of information that has always been bubbling under the surface: it can easily be copied. Technology today is simply exposing the false assumption, made long ago, that information is difficult to copy.

A "free market" in information is therefore not self-regulating, and should not be called a free market at all. It's more like a kind of "non-laissez-faire capitalism"

We should ask ourselves, is the massive regulation required to prop up this system worth it? Or should we just fix this assumption and start anew?

Re:raises an interesting point

[Anonymous Coward]

but they are merely exploiting a property of information that has always been bubbling under the surface: it can easily be copied. Technology today is simply exposing the false assumption, made long ago, that information is difficult to copy

In that case, DRM is nothing more than a return to the status quo: "information" that happens _not_ to be easily copied.

While "easily copied" is perhaps part of the traditional definition of information, this same advance in technology can remove that property. Ease of duplication is not necessarily inherent in "information".

Note that IP law as it exists is based on the old properties of information, not up and coming ones, and thus will likely become inapplicable or irrelevant. With DRM-style information, there would be no need for external copyright law at all. The information wouldn't be copyable any more than a physical object is (currently... :) You don't need more copyright law with DRM; you need less.

Re:Thanks, Mr. Greenspan

[waferhead]

Alan Greenspan is the one asking the questions--

In finacial markets, this is likely akin to The Voice Of God coming down and asking you questions.

Attribution vs. Compensation

[cweber]

I think a intellectual output calls for two protections which are to be VERY differently managed. All too often the two are wrongly lumped into one or at least muddled.

One is attribution: Your idea is yours, and anybody quoting or using it should attribute it to you whenever possible. I think this is an inalienable right and cannot be argued away. The GPL, for example, is very clear on this.

Second is compensation: Your idea MAY be yours to profit from it. Society MAY decide to let you use the idea for profit and help defend yourself from imposters. This is NOT an inalienable right, but merely a social bargain and will change over time to reflect market and societal environment.

I think Alan Greenspan in his speech correctly goes back to the underpinnings of the second protection and asks whether our current system of IP protections benefits or hurts the economy.

Real vs. intellectual property

[sjames]

As I read, an interesting thought struck me.

Part of the problem is that unlike real property secured by a deed, intellectual property claims are terribly vague. In fact, the entire field of patent attourneys pride themselves on being able to be just specific enough to get the patent granted and no more.

No property deed is allowed to claim this house and the land out yonder as a valid description, but that's exactly what patents are like. The resulting uncertainty is increasing the risks at an alarming rate. A good first step would be to tighten up patent claims to be as concrete as possible.

Even a strong supporter of IP should agree to that.

Re:What if we don't want to maximize growth?

[Flarelocke]

Before capitalism, it was thought that there was a constant amount of wealth in the world. Then modern economics came along and pointed to a scenario like this:

A has an item Q. A and B value item Q differently. For simplicity, let's say Q is worth $2 to B and $1 to A. Then, they set up a trade. In order for a trade to occur, both parties must see the trade as beneficial to them. Let's say B gives A $1.5 for Q.

Let's pretend for a moment that there is nothing else in the world. Then the sum of all values in the world was $1 (A's valuation of Q) + $1.5 (B's pocket change) = $2.5
After the trade, the total amount of wealth is $2 (B's valuation of Q) + $1.5 (A's new pocket change) = $3.5

The amount is greater because A and B both have more of the things they want (Q and money). A is better off because he has $1.5 instead of Q (which is worth $1 to him). B is better off because he has Q (which is worth $2 to him) instead of just $1.5 in cash.

Extrapolate this to hundreds of thousands of trades, and you can envision how economic growth theoretically makes everyone happier.

Thus, forcing people to give a number to how much they want things facilitates a redistribution of items that makes everyone get more of what they want. Whether this reduces suffering and increases joy is up to you, but it probably won't have the reverse effect.

My Idealistic Solution

[Apoptosis66]

Here is my idealistic solution to Patent law. Feel free to rip it apart :)

1. All patents must be detailed enough to be reproducible. Meaning if you want to patent a new chip you have to produce the schema. An Algorithm must be detailed enough to be programmed.

Problem: who determines what is reproducible? I couldn't take a Car design and reproduce it.

2. All patents are public record accessible to everyone.

3. All patents are usable by the public for personal use. I can go to the patent office website and get the Honda Accord 2003 patent, and build a Honda Accord for myself. What I couldn't do is build that Honda Accord and sell it to someone else for more than what it cost me to build.

4. All patents must be held by an individual. That individual can sell the patent to someone, or lease it for a given amount of time. Patents would travel with a person. So if I patent an algorithm at Dell, then jump over to IBM. I am still the owner of that patent. Unless I sold it to Dell.

Problem: Group efforts.

5. Regardless of how many times the patent changes hands, it goes into the public domain when the original patent holder dies. I.E. ownership dies with the inventor.

6. A patent is a new patent if it differs from a existing patent by > 50%. Meaning I can take my honda accord spec and mod it to where 50% is not the same, and receive a new patent for my design.

I know I know > 50% is relative. However I can't help to think if we had a strict patent description language we could do this with some sort of binary comparison. Sorry its the programmer in me :)

Well I would like to here what people have to say about these ideas.

Apoptosis