Thursday, February 12, 2009

Intellectual Property

IP: It's a Market Failure Argument

by Jeffrey A. Tucker

In the hundreds of emails I've received over the issue of intellectual property, the number one most common objection to doing without goes like this. We can't subject the matters to free market competition. Some innovations are too easy to copy. Just one look or listen and the producer's idea is taken from. Then another company that had nothing to do with bearing the costs of innovation will be able to reap the rewards. We have to have a period of monopoly if only to inspire people to innovate and bring things to market...

Let's say you have a poorly managed apartment unit with a porchlight that is out. Everyone would benefit from having the bulb changed. But if one person benefits, so does everyone. All dwellers enjoy the light and only one pays...

So it is with markets and innovation. It is just a plain fact that many products come to us every day that are not patented. Look at a Kleenex, I mean, a facial tissue. Any paper manufacturer can make one. The Kleenex company was first to make the big time, and it has stayed on top through relentless innovation in design. So we have fancy boxes of every shape and size, tissues with oil in them, tissues with smells, and various colors and things. The company is still on top.

Everyone has to marvel at how Arm and Hammer stays on top of the baking soda market. Talk about easy to replicate. And yet the company practically has a market monopoly, and has held it for many decades. The innovation here too is relentless: toothpaste, deodorant, cleaning products, you name it.

You can try this at home. Think of any company that has an open-source product that continues to make money and stay up top: Tupperware, Red Hat, Band Aid, Firefox, Tylenol, Bayer, Hershey. It is a long list, nearly infinite...

There are a thousand possibilities for how producers deal with being copied even in digital media. If we open the market up to competition, we will see more innovation in book publishing and movie making, as ever more goodies are piled on the consumer to earn loyalty and a range of options are made available. Consumers win, competitive producers win, and all without government privilege. What's not to like?

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