Seeing as how Dean Baker wasn’t too offended by my name calling to leave a comment on the post below, I figure I should at least explain why I think his opposition to intellectual property rights is wrong. Primarily, because he seems to believe that supply and demand aren’t important concepts where IP is concerned.
Even though it’s practically costless to produce trillions of copies of a song or novel or piece of code, and even though it’s practically costless to get some (though by no means most or all) of those items for free, it’s still important to know how many people actually want them and are willing to pay for them. The profit potential of a creative act is what guides resource use. In other words, commercial failure or success is at least part of what motivates talent to pursue or not pursue innovation (and use or not use their skills elsewhere, in a way that might be better for society). Scale is important here. A $100,000 grantÂ is a significantly differentÂ motivation than the prospect of becoming an internet billionaire or the next J.K. Rowling.
Certainly there are costs to having a system operate the way ours does, but I get the impression that Baker is significantly underplaying the costs of his proposed replacements. Consider this voucher scheme:
There would be two alternative mechanisms through which individuals could use their voucher. As one option they could have the funds paid directly by the government to the creative worker or intermediary of their choice, by indicating their selection on a tax form. Alternatively, they could pay an amount equal to the voucher directly to the creative worker or intermediary of their choice, and then file for a refundable credit on their tax return. In this case, taxpayers would be obligated to keep a record in the event of a tax audit, just as they do now for a charitable contribution.
Problems. For one, consumers don’t pay money to support creative workers, they pay money to buy goods. All books by one author are not created equal, nor are all lines of code by one programmer, and cetera; you lose a lot ofÂ information byÂ reducing the consumer’s ability to distinguish between individual creations.Â Second, for all the inefficiencies Baker claimsÂ to be eliminating, he’s introducing some substantial ones, as well. The “intermediary” role could quickly become a behemoth, replacing labels and agents as antagonists of both artists and consumers. I also don’t know how one doesn’t recoil at the “save your receipt or be audited” provisions here. If this program is large enough to make a difference, it’s large enough to add layers of bureacracy to the IRS and substantial costs to consumers. Now, if I want to support an array of creative workers, I buy their products, giving them money and informing them which innovations I value. In Baker’s world, I have to spend time sending misleading signals (and getting worse products in return), I have to keep all my receipts, file a more complicated tax return, and hope I don’t get audited. Efficiency!
Two other things. First, Baker suggests that it’s improper for companies to have monopoly power. It’s true that pricing power can lead companies to underprovide goods or services relative to some socially optimal amount. But Baker seems to ignore the fact that in the absence of any pricing power, many goods and services wouldn’t be provided at all. Companies and individuals are able to display pricing power based on innovations all the time, outside of what we might consider monopolies, and we allow that because it fuels growth. Consider the Times magazine’s story on Toyota this week, where the reporter notes that a new, time-saving method of painting is kept proprietary. Toyota isn’t a monopoly, but little innovations like that allow them pricing freedom others don’t have, and that pricing freedom is the reason they develop those innovations. Strip that out of the economy at your cost. Second, and lastly, Baker seems toÂ believe that efficiency is a sufficient reason to eliminate property rights. Not to be hyperbolic, but that’s a fairly dangerous idea. It’s hard to build a functional economy without secure property rights.
There are lots of ways to improve IP rules in this country, and lots of smart people advocate for them. Removing the concept of intellectual property rights is not one of them.