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Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.





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Russian Report

via Aleh Tsyvinski
Sergei Guriev and I (together) and Konstantin Sonin (also from the New Economic School) write a bi-weekly column in Russian business daily Vedomosti (jointly published by the Wall Street Journal and FT).

This week Konstantin wrote a very nice column about your book link here

He also has one of the most popular Russian blogs and there is more stuff here link here

Links for the book are Amazon Cambridge University Press and the free online version

This is the translation of Konstantin's article that Babelfish and I came up with:

There are economic questions, on which, it would seem, agreement between scientists is long established. Until recently these firm truths included the need for patents and copyrights. And here matters rested until the book by the economists of Washington University in Saint Louis Michele Boldrin and David Levine in which they reexamine patents and copyrights. They assert that intellectual property is not necessary: that the inventor or the author can profit even in its absence. Moreover the gain to society as a whole from eliminating it - including the users, who will pay less, and other producers - will be significant.

The standard argument of economists in favor of copyrights and patent rights is as follows. In order to provide incentives for invention, it is necessary to provide some reward afterwards. Patents give rise to a short-term monopoly. The problem is that monopoly is always inefficient. In order to force those, who value goods especially highly, to pay a little more, the monopolist restricts supply relative to the amount that would be sold if the market was competitive. Accordingly, the standard argument of economists is that the inefficiency from the temporary monopoly of patent protection is necessary to pay inventors and give them proper incentives.

Boldrin and Levine, relying on the theory they have developed, show based on numerous examples that the costs of intellectual monopoly are greater than necessary for the stimulus of development. Time after time it happens that the great inventors, whose names are known to us from school, after making their first discovery, switch their energy and not less remarkable resourcefulness to fighting for the right to exclusively obtain profit. The activity of James Watt, father of the first steam machine, for a long time slowed the development of more advanced technology and did not bring any special benefit. Watt earned more when his patents expired and he was forced to implement new developments and compete with his followers.

An even more striking example is drawn from recent history - the innovations that have changed the face of the world in the recent decades: especially the development of computer software. (The book also gives a great deal of attention to the pharmaceutical industry.) Until 1981 it was not possible to patent software (in practice is was not really possible until 1994). The success of software, developed freely without patent, shows that even without monopoly the developers have sufficient incentive to actively produce new innovations. Now almost all the large firms cross-license patents with each other and hurry to patent the smallest technological changes in order to be protected from potential rivals.

What would happen, ask Boldrin and Levine, if the latest book of J. K. Rowling was not copyrighted? Without Rowling's copyright it would not earn worldwide six hundred million dollars, but possibly only six million dollars. This would be due to sales during the first few days, during which time the other publishing houses would not yet have time to produce copies. But perhaps for a French teacher this would be more than enough incentive? Whether selling the "first copy" of an idea creates sufficient stimuli for the innovation, is one of the one of the most difficult issues in the book. But to each traditional argument in favor of patents and copyright the authors provide meaningful answers. They do not always disagree: for example, in discussion of the role of commercial secrets.

In the book of Boldrin and Levine very little is said of Russia, beyond mentioning Alexander Popov's priority in the invention of radio. This is discussed in the chapter about how frequently the rewards from the efforts of a large number of people, who work independently of each other, wind up, because of the patent right, in the hands of one person. In our country the question of intellectual monopoly is discussed in the following context. The obvious benefit from the absence of copyright is greater accessibility. If in the 1990's software had been protected from the piracy, the advance of computer literacy would be much slower. In recent years our government has repeatedly moved in the direction of a stricter observance of patent rights and copyright. In other words, in the opinion the authors of the book Against Intellectual Monopoly, in the incorrect direction.

Perhaps nevertheless Boldrin and Levine - both of them among the most highly-paid academic economists in the world - are not right? The book, although based on long-term investigations, and no matter how convincing, has not changed the prevailing view in the economics profession. However, at a minimum there is something to their line of reasoning: I spent 20 dollars and purchased their book, although it - in complete agreement with the persuasions of the authors - can be downloaded free of charge load from their web site.


Comments

I really don't have an issue with software patents, but I do have an issue with software processes and business processes. For example Amazon's one-click install feature is patented as a business process. Recently we saw the popular open source platform Wordpress announce that all themes developed for the software should also fall under the GNU license - which says you can charge if you want but your source code belongs to the community. Wordpress certainly haven't been hindered in their development by not using patents and being very open with their product. - web developer
It's a bit of a loose thread. You figure that some applications of patent are invalid, figure out why, and then before you know it, you're beginning to realise other applications are invalid. Business methods->computer methods->mechanical methods. It's all just state granted monopolies that derogate from mankind's technological liberty (for the enrichment of the state and its cronies who pay them, and the lawyers who administrate). THERE ARE NO GOOD PATENTS. The entire edifice is corrupt.
I agree with @Web Developer that software should be able to have a patent afixed to it but that a general process should not be. There's more than one way to achieve a desired effect with some being better than others. This alone should be reason enough to allow multiple renditions of the 1-Click type purchase process to coexist even if made by different developers. Pistol Pete @ Springfield Armory
No. All software patents are evil. Not a single expert computer programmer has ever come forward in their favor but plenty have come out against them; if all the artisans of a particular craft agree that their work shouldn't be patentable, who are you to say otherwise?
Beeswax brings up a very interesting point. If all practitioners in a field perceive that patents have no value to them in their practice, should there be a way to eliminate patent coverage in that field of practice? I am in favor of some sort of process that would permit the challenge of the value of patents in a particular field or industry by the practitioners of that field or industry such that Congress would be required to consider a petition for the elimination of patent protection in that field.

There are a lot of great points here,but I'm not sure I agree with real-time search being discarded. I agree that it's not very relevant,but isn't the point of it to show what people are currently saying about a topic.
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