KOL494 | Schweizer Monat with Alex Buxeda Interview: Intellectual Property and Property Rights

by Stephan Kinsella on July 4, 2026

Kinsella on Liberty Podcast: Episode 494.

This is my interview by Alex Buxeda of at Schweizer Monat [Swiss Monthly; linktree]; recorded June 22, 2026.

Grok summary: We discussed why intellectual property is fundamentally incompatible with genuine property rights. Stephan Kinsella argued that patents and copyrights are not legitimate property but state-granted monopolies that violate real ownership of scarce, physical resources. He explained that ideas and knowledge are non-scarce and non-rivalrous — one person’s use does not prevent another’s — so enforcing IP requires aggression against others’ tangible property. We explored the flaws in common justifications for patents (especially in pharmaceuticals), the arbitrary nature of IP law, the myth that “creation” grants ownership, and how free competition and open knowledge flows drive far more innovation than government-protected monopolies. Kinsella also addressed the ethics of piracy, the distorting effects of the FDA and tariffs, and why emerging technologies like 3D printing and AI will increasingly undermine IP systems.

Core Case Against IP & Property Rights Fundamentals

Against Intellectual Property (2001/2008) — Kinsella’s foundational monograph making the case that patents and copyrights are incompatible with libertarian property rights based on scarcity and homesteading.
The Problem with Intellectual Property (2025) — A comprehensive recent paper arguing that IP rights are unjust state-granted monopolies that violate legitimate property rights in scarce resources.
Against Intellectual Property After Twenty Years: Looking Back and Looking Forward (2022) — Updated reflections on the original arguments, addressing common objections and developments since 2001.
Intellectual Property Rights as Negative Servitudes (2011) — Argues that IP functions as non-consensual negative servitudes on others’ physical property, violating true property rights.
Another Way to Explain the Problem with IP: Resources v. Knowledge; Ownership v. Possession (2017) — Clear distinction between scarce resources (subject to ownership) and non-scarce knowledge/ideas.
The Prior-Later Distinction (2026) — Clarifies the foundational role of first-use (prior appropriation) in property rights theory.
Structural Unity of Real and Intellectual Property? (2025) — Examines (and rejects) attempts to unify real and intellectual property conceptually.

Copyright Absurdities & Other Examples

Libraries Prepare to Burn Foreign Books, Courtesy Copyright Law (2011) — Striking example of the absurd real-world effects of copyright enforcement.

Historical Libertarian & Objectivist Views on IP

Rothbard and the Galambosians (2005) — Discussion of extreme pro-IP views within libertarian circles and Rothbard’s perspective.
The Galambosians Strike Back (2015)
Around This Time I Met the Galambosian (2013)
Rand Chose IP: Death Over Life (2025) — Critique of Ayn Rand’s strong support for IP.
IP: The Objectivists Strike Back (2009) — Response to Objectivist defenses of IP.
Why Objectivists Hate Anarchy (2009) — Broader context on Objectivist-libertarian tensions, including IP.

Purpose of Law, Schizophrenic State & Broader Theory

The Purpose of Law: Justice and Property Rights (2026)
The Schizophrenic State (2006) — Classic piece on the contradictory nature of state actions regarding monopolies and competition.

Foundational Libertarian Theory

Legal Foundations of a Free Society (2023)
Disentangling Legal and Economic Concepts (2025)
The Title-Transfer Theory of Contract (2024)
A Libertarian Theory of Contract (2003)
What Libertarianism Is (2009)

Recent Audio/Lectures

These resources expand on the core themes of scarcity versus ideas, negative servitudes, pharmaceutical patent issues, market distortions, FDA interactions, practical business strategies, Locke’s labor theory mistakes, contract theory, self-ownership, metaphors in discourse, Objectivist views on IP, the purpose of law, and libertarian first principles discussed in the interview.

Shownotes (Grok)

Podcast Shownotes

Episode Title: Stephan Kinsella: Why Intellectual Property is Incompatible with Property Rights

Guest: Stephan Kinsella (retired patent attorney & libertarian legal theorist)

Host: Alex Buxeda

Episode Summary

Stephan Kinsella delivers a rigorous, first-principles critique of patents and copyright. He argues that IP is not property at all, but a government-granted monopoly that violates genuine property rights in scarce resources. Drawing on Austrian economics and libertarian ethics, he explains why ideas are non-scarce, why IP slows innovation, and why free markets and competition are superior engines of progress. A clear, uncompromising defense of abolishing intellectual property.

Total Runtime: ~1 hour 22 minutes

Key Topics & Timestamps

0:00 – Introduction and Practical Market Realities

Kinsella begins by noting that entrepreneurs can use strategies like loss leaders and price discrimination, but cartels and monopolies are hard to sustain due to competition and cheating — setting the stage for his deeper critique of state-enforced monopolies like IP.

1:00 – Kinsella’s Journey from Pro-IP to Abolitionist

As a former patent attorney and lifelong libertarian, Kinsella originally accepted Ayn Rand’s defense of IP. After deep study while practicing patent law, he concluded that IP is literally unjustifiable and incompatible with property rights. This realization forced him to refine his understanding of libertarian property theory, relying more heavily on Mises, Rothbard, and Hoppe.

4:22 – Core Argument: Scarcity, Property Rights, and Why Ideas Are Not Property

Property rights exist solely to resolve conflicts over scarce, rivalrous resources. Ideas and knowledge are non-scarce — one person’s use does not prevent another’s simultaneous use. Granting IP rights therefore requires using force against others’ legitimate physical property (factories, printers, materials), creating artificial conflict rather than resolving it. IP is not ownership of information; it is a negative servitude on real property.

14:55 – The Pharmaceutical Patent Defense and Why It Fails

Kinsella directly refutes the claim that expensive R&D requires patents. High drug costs stem primarily from FDA regulation, not invention. Patents create monopoly pricing and slow knowledge diffusion, which is the true source of long-term progress. He criticizes utilitarian “market failure” arguments, arbitrary patent terms, and the state’s schizophrenic approach (granting monopolies via patents while attacking monopolies via antitrust). Free markets naturally reward first movers with temporary profits before competition drives prices down.

31:45 – Arbitrariness of IP and the Myth of “Creation” as a Source of Rights

Patent and copyright durations are completely arbitrary. You cannot patent laws of nature but can patent their “practical application” — with no principled distinction. The common belief that “I created it, so I own it” rests on a mistaken reading of Locke. Creation produces wealth by rearranging scarce resources, but does not create new ownable property in patterns or ideas. Labor is an action, not ownable property. This error leads to labor theories of value and justifies theft of others’ physical property through IP enforcement.

46:18 – Competition, Profits, and How Innovation Reaches the Masses

New products start expensive because the rich fund early adoption and refinement. Competition and economies of scale then drive costs down, benefiting everyone. Profit signals attract competitors, which is good — it erodes monopoly profits and spurs further innovation. Attempts to legally protect high profits (via patents) distort this natural process and harm the poor in the long run.

52:30 – Price Discrimination, Arbitrage, and Government Distortions

Price discrimination is natural but limited by arbitrage in free markets. Patents, tariffs, FDA rules, and socialized medicine prevent arbitrage and allow inflated prices. Kinsella shows how IP advocates often abandon free trade when it conflicts with patent privileges (e.g., opposing drug reimportation).

1:01:20 – Libertarian History with IP and Extreme Views

Most early libertarians accepted IP due to its constitutional status and Rand’s influence. Kinsella contrasts this with extreme positions like Andrew Galambos’, who treated ideas as eternal, primary, and inalienable property — a position that would paralyze human action if enforced.

1:08:26 – Ethics of Piracy and Technological Undermining of IP

Copyright violation is not immoral because publishing an idea makes it public — there is no victim or rights violation (echoing Benjamin Tucker). Piracy is already hard to stop and will become harder with technology. Kinsella welcomes this: 3D printing and AI will undermine patents just as the internet undermined copyright, accelerating progress by weakening artificial monopolies.

1:21:58 – Closing

Mutual appreciation and final thoughts on the conversation.

Key Takeaways

IP is not property — it is state violence against real property rights.
Ideas are infinitely reproducible; only scarce resources need property rules.
Patents and copyrights slow innovation, raise prices, and enrich rent-seekers at everyone else’s expense.
True progress comes from open competition and the free flow of knowledge.

Recommended Resources

Stephan Kinsella – Against Intellectual Property
“Do Business Without Intellectual Property” (Kinsella booklet)
Works by Mises, Rothbard, Hoppe, and Benjamin Tucker

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Transcript (Grok assist)

Introduction and Opening Remarks

0:00

Stephan Kinsella: Well, I mean, you could never tell what strategies might work for an entrepreneur. It might make sense to sell at a loss to some markets. I mean, it’s called a loss leader, but of course, there’s nothing wrong with price discrimination in general. It’s just that it’s difficult to get away with, just like it’s difficult to have a cartel. There’s nothing wrong with cartels or with monopoly with attempts to monopolize or collude. It’s just that it’s difficult to get away with a cartel because there’s competition and there’s cheating, right?

Alex Buxeda: I am today accompanied by Stephan Kinsella. He’s one of the most famous and well-known proponents of the Austrian School of Economics. He’s done very important work on economic theory and also patent and you’ve been Stephan one of the biggest advocates against patents and copyright which is exactly what I’m looking forward to talking with you about. And so yeah, how is it that you came to think about patents and something negative to begin with?

Kinsella’s Path to Opposing IP

1:00

Stephan Kinsella: Well, yes, I am a retired attorney in America in Houston, Texas. And I have been a libertarian since like high school, so all my life. And I never really looked at the patent or intellectual property issue too closely. I originally assumed that the standard pro-intellectual property position of like Ayn Rand was correct.

Although it never quite made sense to me because I never understood how you could have a finite like a right that expired, you know, like patent copyright expire. I didn’t quite understand that, but I let it alone. But when I went to law school and then when I started practicing law in 1992, I started initially in oil and gas law in Houston.

But then I switched pretty soon after that to patent law because I was an engineer. So I thought that would be better for my career. So I switched to that. And right when I switched to that I started studying the patent bar and also I was starting to write in libertarian legal issues at the time like rights theory and that kind of stuff.

So, I thought, well, since I’m learning a lot about patent law as a lawyer, and I’m starting to write on libertarian theory, I should maybe take a position on the intellectual property issue. So, I thought I would study it and come up with a better argument for intellectual property than Rand had done.

Like, I thought maybe she just didn’t know it well enough to come up with a good argument. But the more I studied it, the more I finally realized that the reason I was failing and Ayn Rand failed and everyone else failed to justify it is that it is literally unjustifiable. It’s like incompatible with property rights.

So right around the time I started practicing patent law and passing the patent bar in 1993-1994 I also came to the conclusion as a libertarian that intellectual property is totally incompatible with patent and copyright. And understanding that issue helped to deepen well it actually required that I deepen my understanding of the basis of property rights in general from a libertarian point of view like to untangle to disentangle that issue which was confused by almost everyone who approached it.

So coming to my conclusions on intellectual property forced me to I think become a better libertarian thinker and to rely more on the work of Mises and Rothbard and Hoppe and people like that.

Alex Buxeda: You are one of the most dangerous people to make a case in this industry because being a relative outsider to it you came with fresh eyes and you think about it from first principles which is exactly the kind of approach I really like. You also mentioned that property is incompatible with intellectual with ideas because in your book Against Intellectual Property you mentioned that property only relates to things that are limited. If you can replicate a refrigerator or a lawnmower there’s no sense by which we have to address who gets to enjoy the benefits of it when you don’t lose any of it by me learning about your ideas. So that’s this defining property is something very necessary. How do you even approach this from first principles?

First Principles: Scarcity, Property Rights, and Knowledge

4:22

Stephan Kinsella: Right. And so yeah, my approach I was always drawn towards like Ayn Rand’s originally Ayn Rand but then later other thinkers like Rothbard and others but her principled approach to matters like the basic approach is one of individual rights like realizing that the only way to violate rights is through the use of physical force right that that was what the non-aggression axiom or non-aggression principle is about.

I mean, Ayn Rand had a character in Atlas Shrugged say or John Galt say no man may start or initiate the use of force against another. And so that always from the beginning that highlighted in my mind the importance of principles, libertarian principles and distinguishing it from right and wrong. Like so we strictly say that some things you it’s not enough to be wrong or immoral to be outlawed. It has to be a violation of rights. And the only way to violate rights is to commit force.

Now that implies without saying directly, but it implies that the things that property rights apply to or that rights apply to and all rights are property rights. The things that rights apply to are physical things because you can only use force against a physical thing. Force is a physical thing, right? It’s physical force. So that’s sort of buried in there.

So I was looking for a more precise understanding of rights which are property rights to solve this issue about intellectual property. Now as I said I came to it from a generally pro-IP point of view but as an outsider but as a patent attorney. Now I have heard over the years and I heard at that time these the typical arguments given by the mainstream and by other patent lawyers.

Of course 99% or more of patent attorneys would say they’re in favor of patent law just like most school teachers who work for the government schools would say they’re in favor of government schools. And most people who get social security payments or welfare or socialized medicine in Europe, they’re in favor of that too because they get things. But that’s not really an argument for it.

So I’ve heard all these arguments and I’ve heard the utilitarian arguments as well, the consequentialist or utilitarian arguments. And to me, those just didn’t make any sense. I wanted to get to the root of the issue. And so yeah, so it required that.

Now you talk about scarcity and things like that. I saw this right away when I started looking into the issue because that concept of scarcity is part of the economic discussion. Well, it’s economics talks about scarcity. That’s what it’s concerned with. Economics Austrian and others the concern of economics is the study of wealth like how do humans produce useful things that we need to survive? That’s wealth. It’s the study of wealth and human interactions and production.

So that’s what economic studies and it’s of course got to do with the subject of scarcity which is just things in the world that are not in plentiful supply like if we lived in the Garden of Eden as Hoppe talks about then you wouldn’t have any problems you wouldn’t have to do anything you wouldn’t even have to act because everything would be provided to you all the time but that’s not the world we live in the world we live in is a world of challenges and difficulty and uncertainty and we to survive we have to achieve things we have to act.

So the more I thought about this issue, it became clear to me that the economics of Mises, which is he calls his praxeology, the science of action, the logic of human action, praxeology studies that the implications of the fact that we act and what it means to act. And economics has tended to focus on one part of action which is scarcity.

But there’s a second part and that’s knowledge. Because it’s impossible to conceive of human action or a human actor without having to face scarcity in the world and having to use scarce resources to survive. That’s tools or means of action, but also having to be guided by knowledge. We you have to have knowledge about what your ends are, what you’re trying to do, the laws of cause and effect, what things are possible to do in the world.

So every time you have a human that acts, he has to employ scarce resources or possess or use them. That’s things in the world like food and land and tools. And he has to use knowledge at his disposal that guides his actions. So those two things are both important to human action.

Now the thing about human action it employs scarce means or scarce resources. When we say scarce, we mean it’s the type of thing that your use of it can’t be used by someone else at the same time. Like it excludes other people. It’s excludable or it’s rivalrous. For those types of things, you need to possess or use these resources as a human actor.

Even if you’re Crusoe alone on an island, okay? But when there’s other people around, there’s a potential for conflict because these things can only be used by one person at a time. So if there’s other people around, yeah, you can benefit from their company. You can learn from them. You can trade with them. You can be in society with them.

But they also because they have free will, they might use your resource without your permission and take it from you, which prevents you from using it because of its nature. So conflict the possibility of conflict emerges in society which impedes the ability to possess and use resources.

So for this reason property rights are normative rules and laws that emerge in society that allow us to use resources or possess them and to be secure in this ownership because there’s property rights that protect you. So that’s the reason for property rights. Property rights are practical human conventions that allows us to use the resources we need to use to possess without conflict.

So we can live with each other without fighting, without squabbling, without rivalry, without war and to peacefully trade with each other instead. Okay, so that’s the purpose of property rights is to solve the problem of conflict over the use of these excludable resources.

But it does not apply to that second part of human action which is knowledge. Because knowledge is the pool of ideas which Hayek calls the fund of experience that grows over every generation and every day actually as people come up with new knowledge about the world. Understanding of causal laws, understanding of physical processes and recipes Rothbard calls them which are ways of doing things that are more efficient.

So over time we have a greater and greater pool of information we can draw on to inform or guide our actions and that’s why we’re richer than past generations because we have more knowledge at our disposal. So the knowledge keeps improving and expanding, but that knowledge is not a scarce resource in the same sense that a table or a car or an animal or a piece of land or a piece of food, you know, or a tool is or even our bodies.

Because any number of people can use the same recipe or the same knowledge at the same time to guide their actions without coming into conflict. So it just doesn’t make any sense to apply property rights to ideas and knowledge and information. It only makes sense to apply property rights to the things that property rights were invented to deal with, which is the problem of conflict over scarce resources.

So that’s when once you realize that then you start seeing that the attempt by the law to grant property rights in ideas always fails and leads to more conflict because you actually cannot have a property right in an idea. Property rights are always backed by physical force and they always only apply to a physical resource.

So whenever you see an intellectual property right like the patent law or the copyright law in the western world and in the whole world now because of the IP imperialism of the United States and the western world forcing every other country to adopt these laws they’re common around the world now these laws are always really just disguised transfers of control to scarce resources.

So there’s really no such thing as ownership of information. So when you have a patent right or a copyright, it’s called property rights in information, but that’s really not what the right is. That’s just the reason you do that. The reason the states pass those rights is to give a monopoly control to the person who comes up with a pattern of information that’s useful.

But it’s done by giving them the right to control how other people use their own resources. So if I have a copyright, I can go to court and get an order directing physical force against you to not use your printing press to print a book in a certain, you know, that has a certain pattern on the pages. Or if I have a patent, I can get a court order to stop you from selling to rearranging your own materials in your own factory to make a product that looks too similar to yours.

So that’s really what copyright and patents are. They are negative servitudes which is a type of property right and the problem is that they’re not consented to by the person that they burden. So that’s ultimately the problem with patent and copyright is that they restrict and they take away and their theft of property rights and scarce resources.

Pharmaceuticals, Market Failure Arguments, and Patents

14:55

Alex Buxeda: Yeah. The whole purpose of property rights was to avoid the conflict by having an algorithm to follow of who has the right to do something. And our primate evolutionary instinct of something that we have that’s valuable. We have to protect and this is mine not yours. I’m going to territorially defend it. Doesn’t apply to ideas because they replicate easier or they do replicate not as a lawnmower. You cannot replicate it at zero marginal cost. And so depending on the marginal cost, you have to account for that in the restrictions that we apply to it in our conventions of who should have what.

It’s always about the margins. There’s this book by Tyler Cowen, The Margin of Revolution. So I think that the insights about the marginal analysis are very useful here. It always relates to the marginal cost of replication, I think. And so tying this back to the intellectual monopoly and patents, how about the pharmaceutical industry is something that a lot of people have already brought up to you and said, well, how about things that require $2 billion to invest to begin with and don’t have anything guaranteed behind them of having a profit and it can be easily copied.

Stephan Kinsella: Yeah. Well, so if you think about people like Tyler Cowen, I think he and others, they’re generally they might be a little bit skeptical of the excesses of the patent system and the copyright system, but they’re not really… So they’re correct that marginal analysis applies to those, but they see that as a problem because they want there to be an incentive to produce goods that are going to be underproduced because of what basically they view as market failure.

So they basically think that in the material tangible world of tangible goods, you know, there’s natural supply and demand limits on that and you’re able to recoup your cost they call it by selling these things at a profit. Even though you have to compete with other people, the competition from other people is not so easy because if I start selling a product like a new mousetrap or something or a new iPhone and it’s popular, I can sell it at a profit for quite a while until finally my competitors start catching up to me, but it takes them a while to hire employees and to come up with a, you know, to build a factory and to come to compete with me.

So, competition always is there, but it takes a while. But in certain types of things that you sell for profit like services or ideas or things where the value is mostly in the patterning of the thing like a book then it’s or pharmaceuticals it’s said that it’s easier to compete with the producer of those things because you don’t have to well it’s actually not quite true. I mean, it’s not so easy to come up with a pharmaceutical drug to compete with one of the big companies, even if there were no patents because it takes a while to know who to compete with.

But the point is the economists, they kind of want to have it both ways. They’re not against patents and copyrights. So, they see it as a problem that the marginal cost of reproducing is so low because it means it’s impossible to stop competition and to recoup your costs. So that’s why they come up with these patent laws and these copyright laws to intentionally make it harder to slow down the diffusion of these ideas.

When remember the reason humans are richer now is because we have the ability to use these scarce resources in the world according to our ideas and because the sum total of ideas that humanity has developed over the last 10,000 years keeps growing. We have more and more ideas we can use. So when you have people learn things from each other, that’s actually a good thing, right?

So it’s a good thing that we transmit ideas from one generation to the next through writings and through books and things like that and stories and lore. But it’s also good that when you have competition because if I see someone competing making a product that is successful with the customers, I’m learning from that. I’m learning that oh this is how you satisfy customers. So I’m going to start emulating what he’s doing and that’s called competition.

Normally free market economists are in favor of that but they don’t like it when competition is too easy. So they also they want to make the market for selling intangible goods and things that are based upon patterns of information. They want to make that similar to the world of scarcity. Now remember the world of scarcity is not a bad thing but it’s not a good thing either. It’s just the world we live in.

It’s because that we live in a world of scarcity and not in a world in the Garden of Eden that we have a continual challenge in life that we’re always trying to overcome the fact of scarcity. We’re always trying to overcome the difficulty of living and to have more and more efficient production techniques to overcome this scarcity. So the better we’re able to do that, that’s a good thing.

And that’s why more information is good. It allows us to be more efficient in what we do, right? So it’s actually insane to try to say okay the scarce resources that are one part of action the means of action are naturally limited by the fact of the world but and we that’s what we have to overcome all the time in our action but knowledge is not it’s totally unlimited. So let’s apply the same types of rules to that with patent and copyright law to try to slow down the diffusion of these ideas to make it more like the restricted supply of material goods.

It’s crazy that we do that because that’s the reason that we’re richer than we would be. So all these guys are in favor of an expanding field of knowledge, but they don’t want it to expand too fast. So what this means is that since we’ve had modern patent law since around 1800 or so in the US and in the western world, it has acted as a drag on innovation.

Arbitrariness of IP Law and Hypotheticals

31:45

Alex Buxeda: I love how you put it. It’s arbitrary at so many levels. The length of the copyright or the patent is arbitrary. There’s no justification behind it of any type. But there’s also an arbitrariness as to the type of patents. You cannot patent theoretical or laws of nature. Theoretical inventions or laws of nature cannot be patented. But the practical application of it can be patented. How do you justify the difference? No clue. Why do we want more innovation of practical things and less of theoretical laws of nature type things? It doesn’t make any sense wherever you grab it from if you start to think about it a bit more. But I think that your argument was the way you finished the argumentation. I I’m fully in line with you and the beginning you mentioned that it is not the case that in the pharmaceutical industry things cannot be copied or can be copied at a small marginal cost. But okay, let’s say that’s the case that it’s very difficult to replicate. But what if it was the case that something was easy to replicate by reverse engineering and it took a lot of resources to do the innovation? And I’m not necessarily talking about the pharmaceutical industry. I’m just giving a theoretical the same way that everything is a matter of a spectrum. What if there was something that was very difficult to innovate but very easy to replicate? Then it’s not worth doing.

Stephan Kinsella: Okay? I mean, it’s like saying, “Well, what if we want to go to Mars, but it’s just so expensive to get to Mars. No one can ever make a profit getting to Mars. So, the only way we’re going to get to Mars is if the government taxes everyone on the Earth, and we come up with $75 trillion to build the spaceship that finally gets to Mars.” Okay, that’s true. That might be true. But that’s just because you made the arbitrary goal that we’re assuming that more important than anything else in human life is that we get to Mars at the expense of everything else on the earth.

Okay. But the goal of law is not to make sure we get to Mars, right? The goal of law is to do justice. And you do justice by identifying what people’s rights are, which are property rights, and by protecting them. That’s it. I mean, so what these people do is they say innovation is good. And they’re correct that innovation is good considered abstractly, right? Artistic creativity is good. Um charity is good. Uh productivity is good. Efficiency. All these things are good, but they’re not unanchored to the world. You can’t just say because innovation is good, more innovation is always good no matter what the cost, right?

Labor Theory, Creation, and Wealth

37:38

Stephan Kinsella: The natural rights argument is basically the idea that if you create something, you’re the owner of it. Okay, that whole thing is a facetious argument rooted in a mistake made by John Locke in his argument for homesteading. The Lockean homesteading idea is not about creation. It’s about claiming an existing thing in the world. Wealth is rearranging something that you already possess and own into a more useful configuration. So when you have ownership of a thing and you transform it or you rearrange it, that’s called production. If I come up with an idea that allows me to more efficiently rearrange these things, that idea is useful because it guides my action. It’s just a pattern of information that guides action. So this is the fundamental mistake.

Profit, Competition, and Benefits Filtering to the Masses

46:18

Alex Buxeda: Do you know how when a product gets produced the first time the cost of production is very high and later in every product really there’s a reduction in the cost of production as the economy of scale has been created and the people who are poor benefit a lot from the innovation that has been created by the richer people who were paying for the high cost of the first units. This happens with smartphones with pharmaceuticals with televisions with absolutely everything. This is what happens. How do you see this process happening? And ultimately it depends on the caprices of the rich people that they want things sooner. Right.

Stephan Kinsella: Right. I think there’s a couple things here that you could unpack. When a new product or service is introduced in the economy and it’s successful, in other words, it satisfies a need that had not been satisfied before. That’s when profit is possible. Profit tends to decline over time for two reasons. But initially your profit is higher than it could be facing a lot of competition because you’re the only supplier of a good. So even if your costs are going down and your profit would tend to increase at the same time the signals you’re sending signals into the market a profit and loss signals like oh this is what people should do to compete with me. So you attract competition. So in a sense profit is an unnatural thing which is why you know in Austrian economics profit is an unnatural thing in a sense right everything goes to the interest rate but in the real world there is profit because it takes a while for people to compete but you the point is you always draw competition which means that if you have an initial profit it is always going to tend to get eroded because you always face competition. So that’s why there’s always an incentive to keep innovating.

Yeah, I suppose lots of luxury goods or expensive goods like I don’t know a customized cure for cancer or even plastic surgery or luxury cars or air conditioning maybe in the beginning. Things that were done because the rich can afford to pay obscene amounts of money for it. Of course the cost of production goes down over time because of expansion economies of scale and because we learn more and more about how to do it at mass production and efficiency. So of course that benefits the consumers even if the rich people don’t like it. And in fact of course that’s one reason why the producers do this. They’re doing it to test the market and to refine their product and to eventually expand it to sell it to everyone.

Price Discrimination, Arbitrage, and Distortions

52:30

Alex Buxeda: A second question I had related to this is whether purchasing power based pricing would make any sense but you’re already responding to that with an implicit no because why should I charge you less for being in a poor country when that would distort the incentives. People would try to play with this new newly created politics by creating a VPN from Argentina so that they can subscribe to my Netflix for cheaper or all kinds of that emerges from this discrimination based on purchasing power or that if you create a level playing field for everyone, everyone pays the same amount.

Stephan Kinsella: You could never tell what strategies might work for an entrepreneur. It might make sense to sell at a loss to some markets. I mean, it’s called a loss leader. But of course, there’s nothing wrong with price discrimination in general. It’s just that it’s difficult to get away with, just like it’s difficult to have a cartel. There’s nothing wrong with cartels or with monopoly with attempts to monopolize or collude. It’s just that it’s difficult to get away with a cartel because there’s competition and there’s cheating, right? But price discrimination is any seller of any good wants to maximize his profit and would like to price discriminate. That is he would like to know what his buyer is willing to pay. And if there’s a very rich guy that really wants something, he will sell it to him for a higher price. And if there’s someone who will not pay as much, I will lower my price as long as I can still make a profit. People do that all the time. But they can only get away with it so much because the bigger the market, the more they’re selling. You can’t always do that and it also angers people if they start feeling they’re cheated. So there’s always natural limits how much you can get away with. Now if there’s geographically different regions like if I’m selling an iPhone in the US as opposed to India then they simply have less wealth and they can’t pay as much. So I have to lower the price. So as long as I’m making but the problem is if I lower it too much then in a free market there’s arbitrage. That’s the other limit. So if I sell a textbook in one country for $10 and $90 in America then someone will do arbitrage. But the problem is tariffs and not totally free trade policies and copyright and patent are the impediments to this.

Historical Libertarian Views on IP and Extremes

1:01:20

Alex Buxeda: You mentioned in your book uh Andrew Joseph Galambos. Could you give a short explanation of who he was and what he thought and where his ideas are among libertarians?

Stephan Kinsella: Uh, I would say until around in 1989 or so when Tom Palmer and Wendy McElroy and Sam Konkin started writing on this and then later me and others like Roderick Long when the internet happened. I would say most libertarians just kind of assumed intellectual property was legitimate because it’s in the constitution. Like the US Constitution says that Congress has the power to encourage artistic creation and inventions with patent and copyright law. So everyone sort of assumed it was part of capitalism. Nowadays I’d say most principled libertarians realize it’s a big mistake. But in the beginning there was a group of libertarians and free market types who were just generally in favor of it just because it was in the constitution or was part of what they saw as capitalism or because they accepted the kind of the utilitarian case that oh we need to incentivize and encourage innovation and stuff like that. But you had a subset of libertarians who had a more extreme case for IP. Now one was Ayn Rand. She basically said that patents are the most important right of all like every other right flows from that and that’s because of her confusion about this issue we brought up earlier which is that creation is a source of property rights which is not. She believed in finite terms for patent and copyright. But there were some other guys like Galambos who took what Rand did because Rand said patents are the heart and core of property rights. But Galambos basically said they’re the only or the main form of property. He called it like primary property. Like your fundamental property is in your ideas and then everything else is a derivative of that. He believed that primary property which is your ideas should last forever. So there’s no expiration. And they were also inalienable. And they were so inalienable that whoever owned it couldn’t even transfer it to someone else.

Ethics of Piracy, Enforcement Challenges, and Future Tech

1:08:26

Alex Buxeda: Have you thought about the ethics of sharing this kind of resource?

Stephan Kinsella: Yeah, sure. I have and I think that look, you can make a case that we live in an imperfect world that’s not fully libertarian. But I don’t think it’s immoral at all to violate copyright because there’s no agreement and I do believe with what Benjamin Tucker the American anarchist from the late 1800s said that if you want to keep your ideas to yourself keep them to yourself but if you make an idea public right it’s like he gives the analogy of a man scattering money on the street for just throwing in the air and if people start taking it, you can’t complain about that. Likewise, if you have information like if you have a novel in your head or if you come up with an invention in your head, you don’t have to tell anyone. But if you want to tell people, which you have to tell people by publishing a book, if you want to make a profit off of your book, you have to spill the beans and say what your story is. Or if you want to sell a mousetrap with an improved feature, you have to sell the mousetrap and they see what the feature is or you have to tell them what it is. So if you choose to make information public then you can’t complain that people use it and there’s nothing wrong with using it. I mean I don’t think it’s immoral at all. So I see nothing wrong with using pirating resources. That’s the one reason why copyright is hard to enforce. Now, it’s still enforced against the big companies like Netflix and Disney and people like that. Of course, they enforce it themselves, too. Anyone that a plaintiff can sue in court is going to abide obey. But your average person who can go anonymously on torrent, yeah, they can’t be caught. Patents are not quite there yet. But I think patents are actually more important because they’re more damaging to the human race because they’re patents are what slows down and distorts the development and spread of technological knowledge. So I think patents are what is slowing down the advancement of the human race. And so causing you know indirectly billions of human emiseration and death and things like that over time. But patents are still enforceable. So I think that hopefully my hope is that eventually 3D printing will mature enough to where it will start to become a threat to the patent system because people will be easily able to evade the patent system just like they can evade it now with copyright. So when 3D printing matures, if it ever does, like if you can ever print a car or print an iPhone in your basement on a 3D printer using pirated design files, then the patents will be very difficult to enforce and that will reduce prices and be better for the benefit of the consumer. So I’m hopeful the technology will somewhat liberate us from patents just like it’s started to do for copyright. We’ve already effectively open sourced software and we’re hoping we will open source hardware.

Closing

1:21:58

Alex Buxeda: Exactly. Amen. And thank you very much Stephan Kinsella. It’s been a great pleasure talking with you. I’ve been a longtime follower of your work and in Spain there’s Juan Ramón Rallo who got me into your book. I don’t know if you happen to know him, but he’s one of the most well-known libertarians in Spain. So, thank you very much for this conversation, Stephan.

Stephan Kinsella: Enjoyed it. Thanks so much.