Growth comes from competition. Anything that stifles competition has a negative effect on the incentive to innovate. Protect a company completely from competition by giving it a monopoly, like the United States Postal Service, and stagnation is virtually guaranteed. The granting of monopolies and special privileges to certain people or corporations was popular under the system of mercantilism which dominated Western Europe from the 16th century to the late 18th century. This way of thinking eventually became discredited and virtually disappeared in all but one significant area – intellectual property (IP) in the form of copyright and patents.
Copyrights and patents are simply government grants of monopolies which have the same effect as any other monopoly, raising prices, inhibiting innovation and robbing consumers while rewarding special interests. For every person granted a patent because of an innovation another nine companies in competition are disincentivised. With nearly 200,000 patents issued every year in the United States, and half a million more in other countries, intellectual property poses a growing threat to society’s ability to innovate.
Because emulation is essential to competition the most innovative industries today are those lacking access to IP protection, such as fashion, design, architecture and perfume. The successful fashion collection available at upscale fashion houses is immediately copied as the high initial price sends a signal to producers to jump into the market. Next year the product sells at Walmart for one tenth the price. That’s how the free market works. If intellectual property protection was available for fashion items we would all be paying much higher prices for our clothes.
The best evidence that copyright and patent protection are not needed is that the most dynamic and innovative sector of the software industry, open-source software, has voluntarily given up using them. Furthermore, the most profitable and most innovative sector of the web, the porn sector, has no access to courts and IP enforcement because of the stigma associated with it. On the other hand just imagine the effect on innovation if the creators or Mosaic or Netscape had managed to patent the idea of the Web browser as they could today.
The authors of most classic works of literature never received one penny of copyright royalties. Notice also that Walt Disney, the great champion of IP protection, took the material for great productions such as Snow White and the Seven Dwarfs, Sleeping Beauty, Pinocchio, and Little Hiawatha from the public domain. But, you might ask, without a copyright law how will authors get paid? During the 19th century, anyone was free in the United States to reprint a foreign publication without making any payment to the author. Nevertheless, according to Michele Boldrin and David Levin in their tour de force Against Intellectual Monopoly, the amount of revenues British authors received up front from American publishers often exceeded the amount they were able to collect over a number of years from royalties in the United Kingdom. This worked because Americans were very impatient for good books and so English authors would sell American publishers the manuscripts of their new books before their publication in Britain. The American publisher who bought the manuscript had every incentive to saturate the market for that particular novel as soon as possible, to avoid the arrival of cheap imitations. This led to mass publication at fairly low prices. Getting a book out first proved to be the best guarantee of making the most money and gaining market share.
IP destroys whatever it touches. It is impossible to develop software today without running into IP problems so companies feel pressured to build up a war-chest of patents for defensive purposes. In the pharmaceuticals industry there is plenty of evidence that IP does nothing to promote innovation and widespread availability and is largely responsible for the high prices of drugs that has driven the system toward socialization. This is an issue that cuts across party lines. If every new idea was locked in place and given a government monopoly the market economy would simply cease to exist because competition would disappear as competitors were prevented from learning from each other. IP has to go, not only because it leads directly to economic stagnation, but also because, at its core, it is incompatible with a free society.
“He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.” Thomas Jefferson, Selected Writings
“The history of patents includes a wealth of attempts to reward friends of the government and restrict or control dangerous technologies.” James Boyle, The Public Domain: Enclosing the Commons of the Mind