[From Mises Blog, July 11, 2006, archived version with comments (below).
For more on this issue see also The Great Mises-Hayek Dehomogenization/Economic Calculation Debate]
Update:
@miguelhzv Tweet:
The debate on the dehomogenization of Mises and Hayek in socialist economic calculation.
Mises said in 1920 that socialism was impossible as a system of rational allocation.
The argument is that without private ownership of the means of production there is no genuine exchange of factors, without genuine exchange of factors there are no real monetary prices, without prices there is no cardinal calculation, without calculation there is no way to compare alternative uses of scarce resources.
It’s not a problem of the amount of information or computing power. It’s that the very data you need to calculate (the monetary price resulting from competitive bids between owners who risk their own assets) doesn’t exist without the institution of private property.
Eliminate property and you eliminate the possibility of economic rationality. Period.
Hayek shifted the focus. Instead of ownership and calculation, he emphasized dispersed knowledge and coordination.
Prices, in their own way, are signals that transmit fragmented information that no planner could centralize. It’s a valuable observation about how the market works, I don’t deny it. But as an argument against socialism, it’s weak.
Because if the problem is that the planner doesn’t have enough information, then in principle, they could have it. With better computers, with artificial intelligence, with preference-revealing mechanisms.
The door was left ajar, and through it entered Lange, Taylor, and all the market socialists of the 20th century with their solutions that Mises had already refuted at their root before Hayek published a single line on the subject.
Salerno traced the intellectual genealogy, and what he found is revealing. Hayek does not inherit from Menger and Böhm-Bawerk on this point; he inherits from Wieser, who believed that an omniscient dictator could indeed calculate by imputing subjective values without the need for actual exchange. Mises broke with Wieser explicitly. Hayek did not.
Hoppe formulated it logically: “Socialism is a problem of property, not of knowledge.”
Think of it this way: a family centralizes knowledge, a company centralizes knowledge, a CEO makes decisions with incomplete information. No one would say that a family or a corporation is socialist because of that.
They work because they operate within a framework of private property where external prices exist and allow for economic calculation.
What distinguishes socialism is not the centralization of information but the abolition of private ownership of the factors of production.
Give the Soviet planner all the information in the universe (every consumer’s preference, every technical data from every factory, every climatological variable) and he still cannot calculate, because the problem is not that he lacks data but that he lacks the institution that generates the only economically significant data.
Hoppe also dismantles Hayek’s most famous tin metaphor. Hayek says that when the price of tin rises, consumers don’t need to know why: the price communicates scarcity.
And this sounds elegant, but it reverses causality. Price doesn’t communicate anything as if it were a coded message. Price is the result of prior exchanges between owners. Without ownership, there is no exchange. Without exchange, there is no price. Without price, there is nothing to communicate.
The knowledge that prices supposedly convey does not exist outside the institutional framework that generates them. Confusing cause with effect is precisely what makes Hayek’s argument vulnerable.
Hülsmann delved into another aspect that the Hayekian version neglects: business judgment. Knowledge without judgment is sterile.
The entrepreneur is not a passive recipient of price signals; he is an actor who estimates, takes risks, and transforms.
It values the future value of productive factors under radical uncertainty, and that value only makes sense when it risks its own property.
Profit and loss are not mere indicators; they are the disciplinary mechanism that filters correct judgments from incorrect ones.
A bureaucrat who manages other people’s resources may know everything you want, but without skin in the game his judgment lacks the discipline that only personal loss imposes.
Hülsmann insists that business valuation presupposes ownership, not information. And without valuation, no calculation is possible, no matter how much data you accumulate.
Kinsella connected this to law, an angle that is usually ignored. Economic calculation presupposes the peaceful resolution of conflicts over scarce resources. Private property is not only a condition of calculation; it is the condition of social peace that makes exchange possible.
Abolishing private property not only destroys prices; it generates endemic conflict over who uses which resources and how. And in a regime of permanent conflict, the very notion of knowledge coordination is an academic fantasy.
Herbener placed Mises where he belongs, in the direct Menger-Böhm-Bawerk line, deductive, praxeological, centered on human action and property.
Hayek veers toward a more empiricist, more sociological evolutionism, where institutions emerge through blind selection and knowledge takes precedence over property. There is descriptive merit in that, but as an argument against socialism, it is a degradation.
Rothbard wrote as the Berlin Wall was falling, and his tone is one of historical vindication. The USSR did not collapse because it lacked computers or because knowledge was poorly coordinated.
It collapsed because it could never calculate. It survived for decades by parasitizing the prices of the capitalist world for its own internal decisions and using the black market as an escape valve.
When those external supports weakened, the building collapsed. Those who said Hayek had won the debate were wrong. Mises won, because his argument was correct: it’s not a practical problem that can be solved with better technology or better management. It’s a logical problem inherent in the abolition of property.
Yeager tried to salvage the homogenization by reducing the calculation to arithmetic; once you have the data, calculating is trivial. Salerno destroyed this in the rebuttal.
The problem of calculation in Mises is not one of mathematical manipulation of given data. It is one of the origin and significance of that data.
Where do prices come from? From voluntary exchanges between owners who risk their capital. Without ownership, data simply isn’t generated.
It’s not that the planner has the data but doesn’t know how to add it up; it’s that the data doesn’t exist. By equating calculation with knowledge, Yeager unwittingly ends up on Lange’s side.
Huerta de Soto offers the most comprehensive synthesis. He acknowledges differences and appreciates Hayek’s contributions to the analysis of the market process, but he takes a hard line: socialism is institutional aggression against the entrepreneurial function.
Without private property, entrepreneurship cannot generate the information that enables calculation. Everything Hayek describes—discovery, coordination, learning—presupposes an institutional framework of property that socialism destroys.
Hayekian dynamism is real, but it’s a derivative phenomenon. The cause is ownership. And Huerta de Soto also shuts the door on contemporary fantasies: neither artificial intelligence, nor big data, nor shadow prices solve anything, because the problem was never computational. It was and continues to be institutional.
Every advance in computing revives socialist hopes, fueled by the belief that we can finally centralize information. (I have an article on this topic.)
If Mises’ original formulation had been maintained (without property there is no calculation, and there is no technology to replace it), those answers would have been recognized as absurd from day one.
And today the argument returns in new guises. They tell you that artificial intelligence can be used to plan an economy.
Leigh Phillips and Michal Rozworski argue that Amazon’s or Walmart’s algorithms are already central planning that works. But they ignore the fact that Amazon operates within a free-market system with private ownership, competition, and entrepreneurial risk.
What Amazon achieves internally is calculation within a capitalist framework, using external prices as a reference. Remove that framework and Amazon becomes another Gosplan. Technology does not replace ownership. It never has and it never will, because the problem is not technical. It is praxeological.
Private property is not a complement to the market. It is its condition of existence. Without property there is no exchange. Without exchange there are no prices. Without prices there is no calculation. Without calculation there is no economic rationality. Without economic rationality there is no complex civilization.
The chain is logical, not empirical, and no technological advance alters it because it does not attack the correct link.
Mises resolved the debate on socialist calculation in 1920. Salerno, Hoppe, Rothbard, Hülsmann, and Kinsella deepened it, reinforced it, and connected it with the theory of property and law.
Hayek made useful observations about how the market works, but his reframing of the problem as a question of knowledge was a misdirection.
Socialism is not difficult. It is not inefficient. It is not a problem of management, information, or technology. It is impossible as a rational system of organization.
And it is for a reason that no technical progress can overcome: it destroys private property, and with it, all possibility of economic calculation.
July 11, 2006 9:24 PM
On occasion I’ll see someone try to smooth over the Mises-Hayek “dehomogenization” debate which argued whether and to what extent Mises’s and Hayek’s approaches to the impossibility of socialism differed. One side–what I’ll call the Rothbardian or praxeological-Misesian view–sees Mises’s insight as having to do with the use of money prices to serve as a cardinal unit for purposes of economic calculation. This approach is championed by Rothbard, Hoppe, Herbener, Salerno, Huelsmann, and others, and arguably Mises. This view also sees Hayek’s contribution as different, and as possibly confused or flawed: that prices help to spread otherwise localized information through the economy, thus enabling efficient use of resources. The Hayekians tend to emphasize the knowledge or informational aspects of money, but also maintain that this is just “the other side of the coin” of Mises’s insights.
See, e.g., Yeager, in Mises and Hayek on Calculation and Knowledge, “question[ing] the supposed distinction between calculation and knowledge problems.” See also: Pete Boettke, Hayek and Market Socialism: Science, Ideology, and Public Policy (Don Lavoie [in Rivalry and Central Planning, 1985] argued that one must read Mises and Hayek’s arguments as two sides of the same coin, and I follow him in this regard and will not dehomogenize their different contributions to the analysis of socialism”); also his Economic Calculation: The Austrian Contribution to Political Economy (“the essential argument that Mises and Hayek rose against socialist proposals–the problem of economic calculation–and their understanding of how the private property system affords monetary calculation are complementary contributions to economic theory”).
Also see Steve Horwitz, Monetary Calculation and the Unintended Extended Order: The Misesian Microfoundations of the Hayekian Great Society (“An Austrian economics for the 21st century is going to have to rediscover those Misesian insights and more fully integrate them with Hayek’s work on knowledge and coordination. … a “praxeological” social scientist has both a Hayekian and a Misesian task: The Hayekian task is to recognize and describe the nature of the unplanned order that is to be explained, while the Misesian task is to describe the process by which intentional human action is guided such that it can produce that Hayekian order. … The “de-homogenizers” have … correctly identified microfoundations [including] the importance of monetary calculation and Mises’s concept of “appraisement,” but … they ignore what seems to be the obvious relationship between those microfoundations and Hayek’s vision of the social order. That is, they ignore that the outcome of the use of economic calculation by individual entrepreneurial actors and by firms and households is precisely the “use of knowledge in society” that characterizes the Hayekian spontaneous market order.”).
Also: Bob Murphy in a recent post wondered: “I don’t understand why Salerno (and Kinsella and perhaps others too on their side of this) think it so crucial to hammer home the point that market prices don’t convey knowledge.” Murphy and I had some back-and-forth on this in the comments to this post, as well.
(Some more information is available on the Wikipedia entry on the economic calculation debate.)
So the Rothbardians/praxeologists view the Mises and Hayek approaches as different (and the latter as a weaker point, at best, or confused and distracting, at worst); while the Hayekians claim the approaches are complementary and intertwined.
On occasion I have corralled and summarized some of the resources but do this often enough that I thought it might be useful to put some of the links and references in one place. It is my view that the (primarily Rothbardian/praxeological) sources below, at the very least, make it difficult to argue that the two approaches are “two sides of the same coin”. Below is a brief discussion and summary of and some links to some of these arguments.
***
What I take to be the Rothbardian or praxeological-Misesian approach to the socialism-knowledge-calculation debate is found in the writings of: Salerno (Economic Calculation in the Socialist Commonwealth: Postscript: Why a Socialist Economy is “Impossible”, Reply to Leland B. Yeager on “Mises and Hayek on Calculation and Knowledge”, Ludwig von Mises as Social Rationalist), Hoppe (Socialism: A Property or Knowledge Problem?), Hülsmann (Knowledge, Judgment, and the Use of Property), Herbener (Calculation and the Question of Arithmetic; Ludwig von Mises and the Austrian School of Economics), Rothbard (The End of Socialism and the Calculation Debate Revisited), and, of course, Mises (The Equations Of Mathematical Economics And The Problem Of Economic Calculation In A Socialist State; Economic Calculation in the Socialist Commonwealth; Human Action, esp. Ch. 16, Secs. 1, 2, and 3).
A summary of some of these views is found in my essay Knowledge, Calculation, Conflict, and Law. See. e.g. p. 53 and n. 8, discussing Hülsmann‘s discussion of Hayek’s tin example:
In this example, what information, exactly, is supposed to be conveyed by prices? Let us explore the possibilities. Can the original cause of the price increase (i.e., the change in demand or supply) itself be conveyed via prices? Well, no. Prices are the result of action. Thus, action that changes the prices must already be informed by knowledge.8
8 In other words, the prices generated on the market are past prices, which are always the outcome of action, not its cause. Hülsmann (p. 26) explains that “all information that this action was based upon had to be acquired beforehand. The price itself could not have communicated the knowledge that brought it [the price] about.” With regard to the tin example, “tin does not become scarcer and then this fact can come to be known to someone and lead to adaptations. Rather it is the other way around. The very fact that demand increases means that someone already knows of a more value-productive employment of tin” (p. 28).
Note that even Hayek says that mere users of tin do not know “anything at all about the original cause of these changes.” So prices might rise for a number of reasons: 1. because some people correctly assess that supply is reduced and therefore bid prices up; 2. because some people mistakenly believe supply is reduced and therefore bid prices up; 3. because some people correctly assess that demand will increase; 4. because some people mistakenly forecast that demand will increase. Etc. So if price goes up does it give you any information? All you know is it went up for some reason. You don’t know why. The people who bid it up know why they bid it up, based on their own assessment and knowledge–which is of necessity information they have that they did not get from prices; it is their knowledge and opinions that they use to form the price, not the other way around.
In fact it’s important to realize, in my view, that it is not a bad thing that information is “dispersed.” In fact, as Salerno points out (pp. 114-15), “dispersed knowledge is not a bane but a boon to the human race; without it, there would be no scope for the intellectual division of labor, and social cooperation under division of labor would consequently, prove impossible.”
Prices are important because they serve as an “accessory of appraisement.” “Current” (immediate past) prices tell only what the current price structure is, and thus serve as a basis for forecasting what the future array of prices will be, given the current starting point. For this reason, Hülsmann argues (p. 47) that present prices “can have no communicative function because they are only the, if indispensable, starting point for our understanding of the future.”
Some of Mises’s writing is extremely useful here, on the formation of prices and the distinction between future and past prices. See, e.g., Human Action, ch. 16 sec 3, pp. 336-37:
In drafting their plans the entrepreneurs look first at the prices of the immediate past which are mistakenly called present prices. Of course, the entrepreneurs never make these prices enter into their calculations without paying regard to anticipated changes. The prices of the immediate past are for them only the starting point of deliberations leading to forecasts of future prices. The prices of the past do not influence the determination of future prices. It is, on the contrary, the anticipation of future prices of the products that determines the state of prices of the complementary factors of production. The determination of prices has, as far as the mutual exchange ratios between various commodities are concerned, no direct causal relation whatever with the prices of the past. The allocation of the nonconvertible factors of production among the various branches of production and the amount of capital goods available for future production are historical magnitudes; in this regard the past is instrumental in shaping the course of future production and in affecting the prices of the future. But directly the prices of the factors of production are determined exclusively by the anticipation of future prices of the products. The fact that yesterday people valued and appraised commodities in a different way is irrelevant. The consumers do not care about the investments made with regard to past market conditions and do not bother about the vested interests of entrepreneurs, capitalists, landowners, and workers, who may be hurt by changes in the structure of prices. Such sentiments play no role in the formation of prices. (It is precisely the fact that the market does not respect vested interests that makes the people concerned ask for government interference.) The prices of the past are for the entrepreneur, the shaper of future production, merely a mental tool. The entrepreneurs do not construct afresh every day a radically new structure of prices or allocate anew the factors of production to the various branches of industry. They merely transform what the past has transmitted in better adapting it to the altered conditions. How much of the previous conditions they preserve and how much they change depends on the extent to which the data have changed.
The economic process is a continuous interplay of production and consumption. Today’s activities are linked with those of the past through the technological knowledge at hand, the amount and the quality of the capital goods among various individuals. They are linked with the future through the very essence of human action; action is always directed toward the improvement of future conditions. In order to see his way in the unknown and uncertain future man has within his reach only two aids: experience of past events and his faculty of understanding. Knowledge about past prices is a part of this experience and at the same time the starting point of understanding the future.
If the memory of all prices of the past were to fade away, the pricing process would become more troublesome, but not impossible as far as the mutual exchange ratios between various commodities are concerned. It would be harder for the entrepreneurs to adjust production to the demand of the public, but it could be done nonetheless. It would be necessary for them to assemble anew all the data they need as the basis of their operations. They would not avoid mistakes which they now evade on account of experience at their disposal. Price fluctuations would be more violent at the beginning, factors of production would be wasted, want-satisfaction would be impaired. But finally, having paid dearly, people would again have acquired the experience needed for a smooth working of the market process.
“As has been mentioned already, the obliteration of the memory of all prices of the past would not prevent the formation of new exchange ratios between the various vendible things. But if knowledge about money’s purchasing power were to fade away, the process of developing indirect exchange and media of exchange would have to start anew. It would become necessary to begin again with employing some goods, more marketable than the rest, as media of exchange. The demand for these goods would increase and would add to the amount of exchange value derived from their industrial (nonmonetary) employment a specific component due to their new use as a medium of exchange. A value judgment is, with reference to money, only possible if it can be based on appraisement. The acceptance of a new kind of money presupposes that the thing in question already has previous exchange value on account of the services it can render directly to consumption or production. Neither a buyer nor a seller could judge the value of a monetary unit if he had no information about its exchange value–its purchasing power–in the immediate past.” XVIII §4
[Update: See also, on this, Salerno, Ludwig von Mises as Social Rationalist, RAE, Vol. 4 (1990), p. 44.
But see Rothbard, in MES, ch. 4, §5.B, who seems to have a different take than Mises here, though he is not discussed or cited:
“In such a [barter] society, if all previous markets and knowledge of previous prices were somehow wiped out, there would, of course, be an initial period of confusion while each individual consulted his value scales and tried to estimate those of others, but there would be no great difficulty in speedily re-establishing the exchange markets. The case is different in a monetary economy. Since the marginal utility of the money commodity depends on previously existing money prices, a wiping out of existing markets and knowledge of money prices would render impossible the direct re-establishment of a money economy. The economy would be wrecked and thrown back into a highly primitive state of barter, after which a money economy could only slowly be re-established as it had been before.”]
For some other interesting views on this:
- Murray N. Rothbard, “The End of Socialism and the Calculation Debate Revisited,” Economic Controversies (Auburn, Ala: Mises Institute, 2011), p. 846 (“the entire Hayekian emphasis on ‘knowledge’ is misplaced and misconceived”)
- Jörg Guido Hülsmann, “Knowledge, Judgment, and the Use of Property.” Rev. Austrian Econ. 10, no. 1 (1997): 23–48, p. 39 (discussing “the irrelevance of knowledge problems”)
- Joseph T. Salerno, “Ludwig von Mises as a Social Rationalist,” Rev. Austrian Econ. 4 (1990): 26–54, p. 44 (“[t]he price system is not–and praxeologically cannot be–a mechanism for economizing and communicating the knowledge relevant to production plans. The realized prices of history are an accessory of appraisement”)
- Hoppe, “Socialism: A Property or Knowledge Problem?”, in The Economics and Ethics of Private Property, p. 146 (“Hayek’s contribution to the socialism debate must be thrown out as false, confusing, and irrelevant.”)
- Kinsella, “Knowledge, Calculation, Conflict, and Law,” in Legal Foundations of a Free Society, p. 509 n.25: “The encoding metaphor seems to be a pseudoscientific and scientistic attempt to give this kind of economic theorizing a patina of scientific respectability by borrowing engineering terminology. It is scientistic because, in vainly trying to borrow natural science terminology, there is an assumption that only the “hard” or natural sciences have true validity. It is akin to using such inapt phrases as the “momentum” of the leading team in a basketball game, the “energy” of crystals and astral forms, or, even worse, “revving the engine” of the economy. Both economics and ethics can be sciences, but not in the same way as the causal, natural sciences.”
Update: See also these comments from Matt Machaj:
The above analysis brings us to the conclusion that socialism is (contrary to the thesis of many modern Austrians) neither a calculation, nor a knowledge problem. It has nothing to do with numbers (calculation is based on them), and it has nothing to do with the states of mind and gathered data of any kind (knowledge). It has to do with actions of private property owners and the results of the entrepreneurial process of imputation.
…
Prices certainly are “signals.” But they are not the signals transmitting knowledge—they are the signals of exclusion by other property owners. When some factor is priced, it means that one is excluded from using it, unless he is able to meet the condition of paying the asking price. In socialism, the central planner setting the price sets the exclusion or price for himself by himself. From this stems the absurdity of market socialism.
Prices also are not information signals about the immediate past. When an entrepreneur buys the factors today, looking at current prices, it is not the case that prices manifest only the past conditions. Today’s prices manifest current conditions—present expectations of the private property owners—and they include current anticipations of future conditions. Therefore, when an entrepreneur looks at today’s prices, he sees not only the immediate past, but conflicting visions about the future between different private property owners. So the prices do inform us about important conditions, and their function is not just to register the past.
—Mateusz Machaj, Market Socialism and the Property Problem: Different Perspective of the Socialist Calculation Debate, QJAE, Vol. 10, No. 4 (2007)
Update: See Per Bylund, “The Impotence of Knowledge in Economics,” Mises Wire (02/04/2025). This is a fascinating article. I agree that technical knowledge, though useful, is not enough to enable economic calculation. As he writes (quoting Mises):
But the practical man, eager to improve human conditions by removing uneasiness as far as possible, must know whether, under given conditions, what he is planning is the best method, or even a method, to make people less uneasy. He must know whether what he wants to achieve will be an improvement when compared with the present state of affairs and with the advantages to be expected from the execution of other technically realizable projects which cannot be put into execution if the project he has in mind absorbs the available means. Such comparisons can only be made by the use of money prices.
What Mises points to here is that technology—indeed, the knowledge thereof—is not actually helpful in deciding what projects to undergo, what products to produce, or how to best use scarce resources. In fact, more knowledge of what is possible only increases the number of possible ways one can act. But it does not provide any indication of which one is (will be) of greater value.
I quite agree. A couple (possible) quibbles, however (which I have discussed with Per on Twitter). First, Bylund writes:
Knowledge is certainly important for all kinds of things. The lack of knowledge, after all, is ignorance—and ignorance is not an appropriate means for anything.
I would not refer to knowledge as means for action. Rather, it is one of two essential components of successful action: the availability of (causally efficacious) scarce means of action, and knowledge to guide one’s action (specifically: knowledge of causal laws and what technical means work, knowledge of facts about the world, and knowledge about what future ends one expects to satisfy one’s felt uneasiness). I discuss this in “Law and Intellectual Property in a Stateless Society,” in Legal Foundations of a Free Society [LFFS] (Houston, Texas: Papinian Press, 2023), Part III.D:
Another way to understand the error in treating information, ideas, recipes, and patterns as ownable property is to consider IP in the context of human action. Mises explains that “[t]o act means: to strive after ends, that is, to choose a goal and to resort to means in order to attain the goal sought.”[87] Knowledge and information of course play a key role in action as well. As Mises puts it, “Action … is not simply behavior, but behavior begot by judgments of value, aiming at a definite end and guided by ideas concerning the suitability or unsuitability of definite means.”[88]
Rothbard further elaborates on the importance of knowledge to guide actions:
There is another unique type of factor of production that is indispensable in every stage of every production process. This is the “technological idea” of how to proceed from one stage to another and finally to arrive at the desired consumers’ good. This is but an application of the analysis above, namely, that for any action, there must be some plan or idea of the actor about how to use things as means, as definite pathways, to desired ends. Without such plans or ideas, there would be no action. These plans may be called recipes; they are ideas of recipes that the actor uses to arrive at his goal. A recipe must be present at each stage of each production process from which the actor proceeds to a later stage. The actor must have a recipe for transforming iron into steel, wheat into flour, bread and ham into sandwiches, etc.[89]
Moreover, “[m]eans are necessarily always limited, i.e. scarce, with regard to the services for which man wants to use them.”[90] This is why property rights emerged. Use of a resource by one person excludes use by another. Property rights are assigned to scarce resources to permit them to be used productively and cooperatively, and to permit conflict to be avoided. In contrast, ownership of the information that guides action is not necessary. For example, two people who each own the ingredients (scarce goods) can simultaneously make a cake with the same recipe.
Material progress is made over time because information is not scarce. It can be infinitely multiplied, learned, taught, and built on. The more patterns, recipes, and causal laws that are known, the greater the wealth multiplier as individuals engage in ever-more efficient and productive actions. It is good that ideas are infinitely reproducible. There is no need to impose artificial scarcity on ideas to make them more like physical resources, which—unfortunately—are scarce.[91]
[87] Ludwig von Mises, The Ultimate Foundation of Economic Science: An Essay on Method (Princeton, N.J.: D. Van Nostrand Company, Inc., 1962; https://mises.org/library/ultimate-foundation-economic-science), p. 4.
[88] Mises, Human Action, 93.
[89] Murray N. Rothbard, Man, Economy, and State, with Power and Market, Scholars ed., second ed. (Auburn, Ala.: Mises Institute, 2009; https://mises.org/library/man-economy-and-state-power-and-market), p. 11. See also See also Guido Hülsmann, “Knowledge, Judgment, and the Use of Property,” Rev. Austrian Econ. 10, no. 1 (1997; https://perma.cc/DKQ8-JX45): 23–48, p. 44 (“The quantities of means we can dispose of—our property—are always limited. Thus, choice implies that some of our ends must remain unfulfilled. We steadily run the danger of pursuing ends that are less important than the ends that could have been pursued. We have to choose the supposedly most important action, though what we choose is how we use our property Action means to employ our property in the pursuit of what appears to be the most important ends.… In choosing the most important action we implicitly select some parts of our technological knowledge for application.”; emphasis added). See also the related discussion in “Goods, Scarce and Nonscarce” (ch. 18), text at n.32.
[90] Ibid.
[91] For elaboration on the ideas discussed in this section, see Kinsella, “Intellectual Freedom and Learning Versus Patent and Copyright” and “Against Intellectual Property After Twenty Years: Looking Back and Looking Forward” (ch. 15), the section “The Separate Roles of Knowledge and Means in Action.”
Thus, because it is important to distinguish between scarce means employed by actors and knowledge that guides actors in employing the means, I would be careful not to refer to knowledge (or the lack thereof, i.e. ignorance) as an important “means” for human action. They are both crucially important, and distinct. (And this is why property rights are necessary, and possible, in the former, but not in the latter.)
I would also be careful not to elevate the importance of one over the other. Both are equally important and essential to successful human action and thus to human progress. And while it is true that knowledge (knowledge about causal laws, scientific and technical knowledge (“recipes,” knowhow), knowledge about contingent facts of the world, knowledge of one’s own preferences and what ends would satisfy one’s felt uneasiness) is not itself sufficient to enable one to engage in rational economic calculation—for this, knowledge of meaningful prices is also necessary—I think we should be careful not to cavalierly trivialize or minimize the importance of human knowledge for human prosperity and progress. Which I think Bylund gets close to doing when he writes:
Mises discusses both scientific and technological knowledge in Human Action. They are certainly important both for the economy and society. In retrospect, it seems society’s prosperity correlates with (or perhaps was caused by) the accumulation of knowledge, especially as “embodied in capital” (as it is commonly expressed). However, correlation, we are often reminded, does not imply causation. This is the case here, which economists should be the first to recognize.
Society (civilization) benefits from—but ultimately does not rest on—knowledge. Whereas there is more knowledge in the world today, and we are overall more civilized than previously, this is mere correlation. What makes society prosperous and civilized is, as Mises reminds us, a matter of production under the division of labor.
I would be careful here. Yes, we need property rights, division of labor, and market prices to enable calculation. But the critical importance of knowledge should not be minimized. When we emphasize the importance of property rights for a working human order and for capitalist production, we to not downplay the crucial rule of prices. Likewise, recognizing the importance of knowledge also does not downplay the role of market prices. All three are different and important. The first two are crucial ingredients of any successful human action (even action of Crusoe in a Robinsonade; or of actors in a non-money barter society); the third, money prices, is crucial for rational economic calculation and production in any society more advanced than the barter stage.
So in my view, it is not mere correlation that we are wealthier today in large part because of the accumulated technical knowledge we have our disposal (knowledge the development of which patent law hinders, hampers, and distorts, which is one reason I oppose it). We need all three—(1) scarce means (property rights) and (2) technical/causal knowledge (recipes) and (3) market prices—to have successful action and rational economic calculation generates widespread human prosperity.
There can be little doubt that we are wealthier than the Romans largely because of the increase in factor 2. Why is this? After all, we are not smarter than the Romans. If anything it is the opposite (see: Idiocracy). It is because we have for centuries, for millennia even, private property rights, and well as money and thus economic calculation. The very reason for debate about the causes of the tremendous growth during the industrial revolution is that nothing significantly and obviously improved in terms of factors 1 and 3 (property rights and money prices) in the last 200–300 years, and in fact one could argue that property rights are less secure in the last 200 years, since the advent of modern democracy, and monetary calculation has been hampered and distorted by fiat money since the gold standard was abandoned in 1971.
But factor 2, technical-causal knowledge, has continued to increase over time (even though impeded and distorted by state patent law). The human race thus can and obviously has accumulated a “fund of experience,” as Hayek calls it, that contributes to human progress and the creation of wealth. It is not conflating correlation with causation, nor minimizing the crucial role of money prices in rational economic calculation, to explain today’s immense prosperity as the result primarily of the accumulation of knowledge, since there has been no obvious and significant improvement in property rights and money price calculation. (My own view is that the industrial revolution happened when the accumulated technical and related knowledge reached a certain tipping point; I agree with Hoppe that other explanations for the IR are wanting but am not persuaded by Hoppe’s theory either; but I am not sure, and this is neither here not there.) [See also Hoppe: “From the Malthusian Trap to the Industrial Revolution. Reflections on Social Evolution” (Property and Freedom Society 2009)]
This is why I wrote
Nonscarce goods do not need the assistance of prices to ration their availability. They are free gifts that can be shared the world over. How important are these goods? Given that they are inclusive of all information, art, know-how, and anything else that can be possessed and copied without displacement, they are hugely important. Without these gifts, the whole of learning, imitation, and world culture would come crashing down.
We are not truly human without being part of human civilization; and there can be no civilization and progress without the spread, dissemination, and accumulation of knowledge. To be human is to be part of a learning society, a communicating society, an information-sharing society. Society is emulation-based.
As it stands, the existence of the nonscarce good is the basis of all intellectual progress, the foundation of technological and artistic progress, and thereby a boon to civilization. It is also at the core of enterprise. Entrepreneurs succeed by imitating others who have succeeded. Their nonscarce experience and ideas are first copied and then improved, with the goal of profit. The example of success that entrepreneurs follow is itself a nonscarce good. Anyone with the means to do so is free to copy the successful idea and replicate it. The nonscarce good is the fuel of the competitive process.
and
It is obscene to undermine the glorious operation of the market in producing wealth and abundance by imposing artificial scarcity on human knowledge and learning…. Learning, emulation, and information are good. It is good that information can be reproduced, retained, spread, and taught and learned and communicated so easily. Granted, we cannot say that it is bad that the world of physical resources is one of scarcity—this is the way reality is, after all—but it is certainly a challenge, and it makes life a struggle. It is suicidal and foolish to try to hamper one of our most important tools—learning, emulation, knowledge—by imposing scarcity on it. Intellectual property is theft. Intellectual property is statism. Intellectual property is death. Give us intellectual freedom instead!
***
Archived version with comments:
Murray Rothbard wrote that “There have been only two wars in American history that were, in my view, assuredly and unquestionably proper and just”: “the American Revolution, and the War for Southern Independence.” Now these wars may be just under “just war” theory, but in my view they were all unjust by libertarian standards. The use of conscription and taxation alone–by the US in the former, and the CSA in the latter–is enough to condemn the actions of these states as criminal.
Published: January 16, 2009 5:38 PM
Great stuff. Thanks.
Published: January 16, 2009 6:20 PM
Published: January 16, 2009 8:28 PM
Published: January 16, 2009 9:23 PM
As I argued on my blog:
“All of the economic calculation arguments equally apply as critiques of lack of intellectual property. When Mises and Hayek formulated their economic calculation arguments, they made a powerful case regarding the practical implications of the lack of property rights. However, they cannot delimit by fiat the full extent of their arguments’ logical implications: only the logical examination of the arguments’ premises and steps can do that.
“What Mises and Hayek actually accomplished was to establish the need for the ability to perform economic calculations in any situation in which an actor has the choice between alternate uses of any scarce means toward ends, not merely those that they deem “economic goods”. And indeed one quite common choice actors face is that of expending scarce means (their time and labor) to produce non-scarce intellectual works, versus expending those means toward some other end.
“In such a situation, any claim about the implications of lack of price signals (due to lack of property rights) would likewise work against the lack of property rights in the potential intellectual work produced. The absence of IP effectively places a “price cap” on the intellectual work of $0, although other goods and services related to that intellectual work (transmission of it, future cooperation regarding it, etc.) may still have prices. An entrepreneur would therefore always “see” zero monetary demand for the production of the intellectual works he is capable of, even though we know at least some intellectual works have positive value (at least one person would pay some amount of money for that intellectual work to be available somehow).
“While the existence of these other, related goods with prices, may appear to give the accurate, relevant price signals, it does not: prices for them signal consumer desire for different behavior than prices for the intellectual work would. (To be specific, the “price of an intellectual work” is the “price of the right to legally instantiate that intellectual work”, just as the “price of an orange” is the “price of the right to legally use that orange”.) For example: desire for a machine that is capable of producing a pill according to a given formula, is not the same as desire that the knowledge exists of how to make a pill that cures cancer. In the fomer case, the actor values physical manipulation capability; in the latter, he values the status of a malady changing from incurable to curable at a cost.
“Therefore, any libertarian critical of the ability of property-free economies to rationally allocate resources, should also see a type of calculational chaos to the extent that actors choose for or against producing intellectual works.”
***
All Stephan_Kinsella has done here is show a vague resemblance between Hayek’s argument and his personal beliefs; more realistically, Hayek has shown — though he may have wished to deem this “not an implication” without giving a reason — that IP-free societies are in a state of calculational chaos with respect to ideas.
Sadly, I doubt anyone’s going to give my point any serious consideration, as it criticizes a sacred cow here.
Published: January 16, 2009 11:17 PM
If your point is not taken more seriously than this, it is not because of ideology, but rather the weakness of the argument itself. But, condescending as always, you dismiss a very convincing position (the principled opposition to “IP,” as advocated by some here) as a sacred cow.
Published: January 17, 2009 12:18 AM
It is kinda like the concept of zero is considered heretical in time past. In the mind of ancient thinkers, it was a concept quite difficult to grasp.
Published: January 17, 2009 12:55 AM
It is not surprising then that the early users of zero in twelve century Europe did not disclose their “invention”. They only sold their service instead of disclosing the knowledge to the masses for decades or as long as they could keep it secret. We had social planners instead of patent laws then, too.
Published: January 17, 2009 2:18 AM
You showed in your reply that you are not an inventor. Here is the opportunity to show that you are not an entrepreneur either.
Again, back to Silas question translated for you: how do you expect an entrepreneur to rank and select an inventor from the inventor pool?
Published: January 17, 2009 2:27 AM
Yes, people freely give out information to others (and have been for thousands of years) just like they give out tangible property. This doesn’t negate or abolish property.
This argument is so weak that full socialists aren’t even using it. No socialist claims there can not be private property because people like Bill Gates have been giving out parts of his wealth for years to others.
Published: January 17, 2009 5:48 AM
Published: January 17, 2009 6:57 AM
Published: January 17, 2009 8:05 AM
This argument makes no sense at all.
In the first place, there is no right to a “flow of knowledge”, just as there is no right to an education. There is only a right to seek knowledge by means of your own effort or trade for it with others who know what you wish to learn.
In the second place, you are free to pass any book you purchase on to whomever you wish — just as you are free to restate the knowledge, using your own, new wording and phrasing, and publish a billion copies of if you wish. Indeed, there are vast numbers of such books published every year that contain restatements of knowledge first published by someone else.
In the third place, in the case of patents, you are not permitted to restrict any knowledge about the invention. To the contrary, the patent must contain a full disclosure of the details of the invention’s design, a complete description of its features, a disclosure of what distinguishes it from any relevant prior art — there is even a requirement that the patent disclose the best method of manufacturing the invention. When the patent is granted, the patent document is released into the public domain and may be copied and disseminated without limits.
So not only is there no right to a “flow of information”, there is nothing about IP that restricts such a flow. Your argument makes no sense.
Published: January 17, 2009 9:07 AM
I don’t understand this notion.
1) In the first place, what is more “scarce” than a new design I just conceived and put on paper? Prior to my effort, it did not exist at all; now that I’ve brought it into existence, it constitutes a single new innovation. Why is that not “scarce”.
2) More importantly, why do only “scarce” items qualify as property? What is your definition of “scarce”?
Published: January 17, 2009 9:21 AM
I am sure the original socialists were as baffled as these IP socialists are. They had no answer back then, they have no answer right now.
Published: January 17, 2009 9:58 AM
To the extent state policies–both IP itself and the others that reduce wealth–impede innovation, this, too slows the development and progress of new ideas, recipes, technical information, scientific discoveries.
“In the third place, in the case of patents, you are not permitted to restrict any knowledge about the invention. To the contrary, the patent must contain a full disclosure of the details of the invention’s design, a complete description of its features, a disclosure of what distinguishes it from any relevant prior art — there is even a requirement that the patent disclose the best method of manufacturing the invention. When the patent is granted, the patent document is released into the public domain and may be copied and disseminated without limits.”
Sure, but many companies do not even attempt to innovate in some fields, because they are afraid they can’t sell the products they develop because of patent problems. So the engineers don’t have an incentive to read up on the literature, to innovate, etc.
Published: January 17, 2009 10:00 AM
“What aspect of selecting an inventor would be impossible if “IP” laws were eliminated?”If you eliminate IP as worthless you will eliminate all the reference related to IP (Patents). Currently, patents serve also as a measure to rank inventors, too. Without them, at a job appication, you have resumes without references.
Again, back to Silas question translated for you: how do you expect an entrepreneur to rank and select an inventor from the inventor pool?
Published: January 17, 2009 10:57 AM
So, with those thoughts in mind, I scrolled down to add my own thoughts to the preceding mix. And, lo and behold, the very final one (by Michael Smith) ably presents the very crux of the argument I should have made if he hadn’t beaten me to it. So, I shall restrict my further comments to some less-important (but variously germane). They are not organized into a “case” ; they’re just observations.
This is a “Misesian” site, i.e., one intended to provide a forum for questions and discussion particularly economic and particularly informed by our Austrian view, especially as propounded by Mises. But Mises himself is neutral on the subject. But, even in describing the matter as controversial, he insists (in considering “the external economies of intellectual creation”) that such controversy is not of catallactic significance. At this point (and in light of the foregoing), it thus seems to me to be somewhat of an “impropriety” to make the Mises site not only the place for frequent pieces devoted to the single, not-specifically-Misesian subject but, additionally, the seeming or apparent ‘sponsor” for one particular “side” or view of the matter. A visitor not particularly Misesian in view or knowledge might very well conclude that the anti-patent-and-IP view of Mr. Kinsella were specifically those of Mises and the Austrian School. In this wise, such articles render a distinctly negative (marginalizing) service to the site that it doesn’t need, no matter how well done are the pieces themselves. I would actually wonder why such pieces are carried on this site rather than on the LewRockwell.com site (as I note the usual, in all other regards, rather scrupulous separation on the basis of content).
Mr. Kinsella has (at many times and in many pieces) noted that the patent office seems inclined to superfluity in such awards; indeed, that very many are not only, on their face, impossible of practical realization but even eminently mockable. But here a point is missed (and it is an eminently Misesian point, at that). And that is that, at all times, there exist (whether the subject of patents or not is not at issue) a (“invisible mountain, reaching to the stratosphere,” the quoted expression being from somewhere I forget) plethora of as-yet-impracticable ideas available for the progress of civilization awaiting only some as-yet-unrealized event (as momentous as another enabling discovery or as prosaic as a change in price structure) for their practical (profitable) realization. With that understanding, it can be seen that many of the “far-fetched” patents are less unreasonably granted; they, too, add to the store of such ideas available to the future (and the very unlikelihood of their actually underpinning an exercised “monopoly” in the succeeding 20-year patent period ought to elicit some of Mr. Kinsella’s approval, rather than his scorn).
In closing, I would expand somewhat on another point made by Mr. Smith. The library of patents issued is a technical resource in and of itself. Whether or not its maintenance is a proper function of government or whether the costs of its operation are justifiable is not my subject; merely that the existence of the resource is an organized technical aid addressable not only by those seeking to learn whether a particular idea is liable to be patentable but also as a source for the enlargement or improvement of existing ideas (and whether already embodied in products and processes or not). Thus, it makes eminent sense for many already in business to periodically review such data; not only is it possible, thereby, to discover novelties of some potential value with respects to one’s own products, it is even within reasonable conjecture to find sales opportunites for one’s own products within the material (or process) requirements of someone else’s.
I don’t think I’ll find much disagreement in naming Ben Franklin an outstanding inventor and a true philanthropist and humanitarian. Bifocals are still in use
as was, until relatively recently, the “grabber” thingamajig he cobbled together to get books down from high shelves (and was ubiquitous in grocery stores), and the ideas of lending libraries, adult evening schools, and volunteer fire departments are only a few credited to him. Franklin was anxious not to delay public benefit from his innovations and so did not bother with seeking patents for them. That was, indeed, generous of spirit of him. However, we also shouldn’t overlook that ol’ Ben was a great believer in the efficacy of a paper money system, even relishing the fact that he was “in the business” of doing the printing on contract with the government. Nobody sees everything clearly. In the case at hand, I suggest that Mr. Kinsella (and others against patents and IP) have not much more than imagination to reveal what would occur were those institutions to be dismantled.
Published: January 17, 2009 11:03 AM
Economists like Mike Masnick have already covered this ad nasuem.
The pro-ip crowd choose to not see what can already be seen. It is a level of ignorance above “the seen and the unseen”.
Published: January 17, 2009 11:53 AM
Actually, though, my major point is in my own 4th paragraph. It seems as though what appears to have been intended as and is represented as a Misesian site is constantly subject to attempts at “takeover” by those militating against IP and by those nearest the extreme libertarian end of the
authoritarian-freedom spectrum. Nor even have I paid enough attention to knwo whether there’s any relationship between those two groups or whether they’re just two separate sets of opinions each intent on grinding their own axes.
I don’t have any well-formed opposition to either of these groups other than the constant intrusion of what seem to me to be partisan matters where they (in my own opinion) don’t belong. I cannot see either of those positions as following with any logical necessity from economic knowledge. And, as expressed in my comment to Mr. Smith, I view such intrusion as quite liable to mark (to visitors, especially those actuall interested in economic matters) the site as dominate, if not owned, by proponents, not of Austrian School views but by poartisan supporters of these two essentially political planks.
Published: January 17, 2009 11:53 AM
(The shortest and most comprehensive, if those are available together.)
Published: January 17, 2009 11:59 AM
Published: January 17, 2009 12:04 PM
Published: January 17, 2009 12:14 PM
Quite honestly, I find people like you who take a pro-IP stance to be pro-state, anti-freedom, and anti-free market.
LvMI is merely taking the reasonable ideological stance on this issue.
Published: January 17, 2009 12:30 PM
All property rights are a “restriction” on the property in question and all of them constitute the acknowledgement and enforcement of a monopoly — specifically, the acknowledgement and enforcement of the owner’s monopoly on the exclusive right to the use and disposal of the property in question.
And yes, property rights make property more expensive — having to earn money and pay for property is more expensive than simply seizing it. Kroger certainly increases the cost of food by putting their profit margin on every item they sell.
So “restrictiveness” and “increased expense” cannot be grounds for excluding the recognition of IP — not unless you are going to exclude the recognition of all other property rights as well.
Published: January 17, 2009 3:07 PM
The rest of your point is a non-sequitur. From the fact that there is demand for goods related to intellectual works, it does not follow that the demand reflects the value of the intellectual work. Among other ways to prove this, imagine downloading data. In the absence of IP, it costs just the same to download a song as to download a randomized stream of bits. But who would claim that people are indifferent between artists a) producing recognizable music, and b) producing random bitstreams?
All such related goods have the same problem: you needn’t be the one that produced the intellectual work, or have any contractual relationship therewith, in order to produce them. So the price of them *can’t* reflect demand for the knew knowledge, no matter how big such demand is.
@gene_berman: Thanks for the feedback, I hope you take the time to read the main post and the discussion in the link I gave.
Published: January 17, 2009 3:15 PM
I’ll repeat two points and questions I asked of Inquisitor earlier:
1) In the first place, what is more “scarce” than a new design I just conceived and developed? Prior to my effort, it did not exist at all; now that I’ve brought it into existence, it constitutes a completely new innovation. Why is that not “scarce”?
2) More importantly, why do only “scarce” items qualify as property? What is your definition of “scarce”?
Published: January 17, 2009 3:17 PM
@Inquisitor: Now, when are you going to actually demonstrate ideas are scarce, i.e. economic goods?
As I said above, I don’t designate ideas (once widely known) as scarce, or as economic goods. However,
a) The *rights* to *exclusive* use of an idea are certainly scarce.
b) It doesn’t matter if ideas are scarce or if they’re “economic goods”; as long as people spend scarce goods to produce them, the lack of property rights in ideas creates calculational chaos when entrepreneurs decide whether they will produce ideas or physical goods.
BTW, there’s no “right” to have property rights enforced… it’s up to the parties involved to secure them. So if they want to protect “their” IP (the same is true of their actual property), they can do so with their own money and time and stop wasting everyone else’s.
Yes, it’s certainly wrong to make third parties pay such costs. However. all that proves is that the costs should be shifted to the rights violators, not that the rights should simply not exist! It’s a red herring that IP opponents would spot in any other context.
Published: January 17, 2009 3:54 PM
Remove my labor and capital from the equation and not only does the first copy of my work cease to exist; ALL other subsequent copies also cease to exist!
It is by that definition that I insist that I own the product of my work, that I retain rights in all copies. When I sell someone the right to possess a copy of my work, I sell them some rights, I do not sell all rights. I sell to them the right to possess my work themselves, to avail themselves of it, even to display it to their friends and family. I even assert that they have the right to make copies of my work for different media, so long as the use of that work remain in their possession and not passed on to others. I do not however sell to them the right to profit from my work nor to give away copies of my work to other people.
Published: January 17, 2009 5:13 PM
Published: January 17, 2009 5:40 PM
How do you feel about use restrictions on IP? If the idea is sold, who then owns it, and can choose what to do with it?
Physical property theory has a “clear” system of determining ownership and transfer rights. Likewise, if I buy a pair of shoes, I get to determine where I walk in them. Do you posit that IP creates a new class of ownership rights, allowing rights and restrictions beyond those offered to physical property owners?
Physical property ownership, as proposed by Rothbard, is perpetual. Physical property does not transfer between classes or owners other than by the voluntary action of the owner. If an idea can be property, it doesn’t seem like it would ever be a work under that sort of property theory.
Published: January 17, 2009 7:36 PM
as regards “scarcity”, kiba has provided a useful link. once your idea has passed into the public domain, there is no limit to the number of people who can store and use that concept. by contrast, even abundant physical substances may be situationally scarce (ie sand at the north pole, water in the desert etc).absent ip, you would have to resort to private accords in order to maintain the scarcity value of your idea. over time, it’s difficult to imagine you being able to monopolize this know-how privately, but short-term it may be doable.
Published: January 17, 2009 10:28 PM
when i sell you a hammer, i hope you use it to hit nails, but i cannot compel you not to use it to hit your neighbour on the head. selling implies cessation of all ownership and associated rights. if i find you’ve been buying my hammers with violent acts in mind, the best i can do is to cease dealing with you.
Published: January 17, 2009 10:36 PM
As for the other questions: it’s kind of interesting how anti-IP libertarians shift their standards when the topic changes to something they don’t like. I don’t know if that describes you, or if you’re just asking a clarify question, but that’s been sadly common in discussions on IP here that I’ve joined.
Yes, the state can and has dictated intellectual property rights. It’s done the same for physical property rights. Just the same, physical property rights can arise without the state, through convention and recognitions within private legal systems. And so too, I claim, can intellectual property rights.
Published: January 17, 2009 10:38 PM
The problem with this reasoning is that (real) property rights predate the state and are not dependent on it; we libertarians can easily describe what we are in favor of. But IP exists only because of the state. Patent and copyright are legislated, positive-law grants of monopoly privilege. You fair-weather IP advocates back off of every jagged edge we point out, till we reasonably start to wonder what in the world you guys really favor, if you will agree with all of our critiques’ of manifest absurdities and injustices. You can’t just kick the can down the road and say, “let the courts figure it out,” like Congress enacting an Americans with Disabilities Requirement with an amorphous “reasonable accommodation” requirement; or Congress adding “privileges or immunities”, or “the general welfare,” or “necessary and proper,” etc. etc., to the Constitution, expecting later generations to figure out what the hell these positive law assertions mean in practice.
As I explained here:
Published: January 17, 2009 11:21 PM
It has nothing to do with my business and entrepneurship stance.
Published: January 17, 2009 11:24 PM
Published: January 18, 2009 8:26 AM
Published: January 18, 2009 8:38 AM
Published: January 18, 2009 12:32 PM
Yes there is a concept called “renting” which I guess Newson is not familiar with. So this argument is only a matter of semantics.
Published: January 18, 2009 1:48 PM
Published: January 18, 2009 3:12 PM
Published: January 18, 2009 4:04 PM
Published: January 18, 2009 4:42 PM
Copying is not quoting. No one here is defending theft.
Published: January 18, 2009 6:17 PM
Published: January 18, 2009 6:17 PM
To me, the answer is obvious: no. The only difficult situation is if the way Bob acquired the intellectual work involved some illegal means.
If Joe breaks into Coca-Cola and steals their secret formula, and then he writes it down on paper and gives that paper to Bob (assume Bob had no prior contact with Joe), is Bob allowed to use it as he wishes?
This is kind of a difficult question, and it’s related to questions about all stolen property. If B steals something from A and randomly passes it onto C (C had no prior contact with either B or A), can A demand it back from C? What if C has demolished it, taken it apart? Is C required to pay for damaging A’s property? What if C has traded it to D, who has traded it to E, and so on?
I’m thinking there are two possible solutions.
1. Once B steals something, it becomes his property. While A does have the right to demand some form of restitution from him for the act of stealing–and this restitution may include returning the stolen property if B still has it in good condition (by the way, I think punishment is a difficult and perhaps a necessarily ad hoc issue)–the stolen property is B’s from the moment he takes it. Therefore, if B sells it to C, or breaks it up and sells the parts to D through J, then A cannot demand his property back from the others.
2. When B steals something, it remains A’s property. Then, if B sells it to C, C does not really own the property; B is guilty of fraud in addition to theft, and A has the right to demand it back from C. And if C sold it to anyone else, he is guilty of unintentional fraud as well; and if he broke the property up and built other things out of it and sold them, then the situation is really messy, because all those pieces still belong to A, but now it’s nigh impossible to get them out…
I don’t like 2; 1 seems pretty elegant, and a lot more workable. Ok, I have now decided that, when you steal something, it becomes your property. (I repeat: the act of stealing it is a punishable crime, and if it’s in pretty unchanged condition, I would consider it a reasonable punishment for the previous owner to demand that you return it, plus possibly some other penalties. However, it remains the thief’s property until such punishment is exacted; you would be free to sell or break or otherwise mess with it in the meantime.)
I therefore conclude, in parallel: Suppose B does something illegal to obtain the information required to reproduce A’s intellectual work. Then, on the one hand, A does have a property-rights violation claim against B, and it might be a just punishment for B to be forcibly prevented from distributing copies of this information if he has not done so already. However, if B has already distributed copies of this information to C, D, and E, or if he does so in the future, then A cannot demand that C, D, and E refrain from using or redistributing more copies of this information. (A could say “Pretty please” and pay hush money to C, D, and E to hopefully persuade them to shut up, but A could not use force on them.)
To all of you who claim that zero intellectual property rights imply that the cost for copying someone’s intellectual work is zero… you’re wrong. For one thing, it is extremely easy to copy such things these days (e.g. patents) because those who have copyrights or patents on them post them freely on the internet, which they do because of currently existing IP laws. If those laws didn’t exist, the producers of such works would not post them on the internet, or at least they would require you to verify your identity and then sign a contract that said you would not copy it, before they let you load the page. (Perhaps you cannot imagine an efficient solution like that. Perhaps your imagination will be far outstripped by that of the free market.)
It’s like issues with free speech. There are certain kinds of speech that I find extremely unpleasant to listen to. So, are my rights being violated when others say extremely unpleasant things to me? Answer: Where are they saying these things? It has to be somewhere. If they’re magnifying their voices with big speakers and aiming them at my window, I might consider that a property-rights violation. If I’m at their house by their invitation, then my rights are certainly not being violated, unless they agreed to not say such things while I was there. If I’m at work with them, then it’s the responsibility of whoever owns the workplace to decide what behavior is allowed there and what isn’t.
People who don’t think about this, who don’t realize that offensive or hurtful speech has to occur someplace and that the rules can be whatever the owner of the place sets them to be, who think that laws about speech have to be the same everywhere, are forced to come up with a ridiculous ad hoc mishmash of an ethical system. (“Well, I support free speech in general, but surely kids shouldn’t have to put up with racial insults in school, and surely one shouldn’t have to hear loud profanity and insults on the street, although it’s certainly ok for people to use swearwords in normal conversation, and …, but …”)
Likewise, people who don’t think about where you would have to be in order to make a copy of an intellectual work (how do you, say, acquire a copy of a book without buying it or borrowing it from the library, both of whom could easily stipulate–some of which, today, stipulate–that you may not copy it? How do you copy the design of a machine without standing in a place owned by the person who owns the machine?) are forced to this ridiculous conclusion: if there isn’t an aggressively imposed law preventing people from copying certain things in certain situations, then there will be nothing preventing people from copying those things in those situations. This rests on the same line of reasoning as the idea that, if there isn’t an aggressively imposed law preventing people from saying certain things in certain situations, then there will be nothing preventing people from saying those things in those situations; it is just as fallacious.
Published: January 18, 2009 10:25 PM
1. Once B steals something, it becomes his property…
2. When B steals something, it remains A’s property…”
You then conclude that it is possibility number 1 that you find more workable and elegant and base the rest of your though upon that conclusion.
However actual law reaches conclusion number 2. If B steals something from A, and sells the stolen thing to C, The thing remains the property of A. If everyone is found out, A may demand the thing back from C and C’s only recourse is to sue B for restitution.
Published: January 18, 2009 10:51 PM
Actually, after thinking about it for a while, I thought that perhaps it’s not the act of stealing something, but rather the act of destroying its original form, that makes the result into the thief’s property. That ethical system is functionally very similar to the system I stated as solution 1, where stealing something turns it into your property.
(Of course, the point where the original form can be said to be destroyed is kind of arbitrary–if all you do is paint it green, is it still the original owner’s property? What if you break it in half? What if you break it in half again? What if you glue one small piece of it onto something else? And what if you sell it to someone else? Etc. I think it’s cleaner if you simply say that the stolen property becomes the thief’s, and then the owner, in deciding on a punishment, can decide for himself whether he wants his stuff back or some other form of compensation. That would be kind of messy in some cases, though… as I mentioned, I suspect that proper punishments cannot be figured out a priori.)
Consider the situation where B sold the stolen property to C, who sold it to D, who sold it to E. E has made an agreement with D, paid money, and gotten something from D’s possession and put it into E’s own possession. Does E nevertheless not own this thing? I would hate to say no, although I could understand the response that E should have made sure that what he bought was not a stolen good (and ditto for C and D). There is cultural precedent for A having to buy it back from E, but… Meh, it’s hard to figure out, and the decision between these two ethical systems is not relevant here.
Regardless of whether B owns the property he just stole, he certainly owns the paper on which he writes down a copy of the information needed to produce an “intellectual work” like what he has just stolen. (You must either admit that or assert that, by stealing an intellectual work, B partially loses ownership of all of his property that could be used to copy what he just stole. I think that is kind of ridiculous, though I’m not absolutely eliminating the possibility.) If B owns whatever property he uses to make a copy of this information (including his brain and vocal cords), then he is perfectly within his rights to pass the information on to C through J, and each of them is perfectly free to pass it on to anyone else; the figurative cat is out of the bag.
Something else suddenly occurs to me. Just what do IP laws forbid you to do? You are allowed to memorize the contents of a book, presumably, but you are not allowed to make copies and sell them. Are you allowed to make a copy and not sell it? How about a partial copy? (See “fair use.”) It’s pretty arbitrary. I consider arbitrariness in the fundamentals of an ethical system–numbers or concepts that do not come from anyone or anything in the given situation–to be a damning flaw. So let’s see if the arbitrariness really is fundamental to the system of IP rights.
Is it arbitrary because the maker of the intellectual work has the right to prevent you from doing any kind of copying, but they voluntarily choose to waive most of that right? Could an author, in theory, decide that, for her next book, she is not going to waive her right to prevent you from mentioning any aspect of the plot to your friends? (Without that being stipulated as a condition of buying the book. Remember, once again, the IP rights that we’re arguing about is those that are not created by contract; I think everyone agrees that contractually created copy-protection is fine.) Could I decide, even though I have chosen to put this post where anyone with an internet connection can read it, to not waive my right to prevent you, the reader, from quoting any part of this post anywhere? Did Watt have the right to never allow anyone to duplicate his steam engine?
No. That’s absurd. Therefore, I think the theory of IP rights must rest on either some ridiculous empirical, ad hoc ethical system (“It is morally wrong to reverse-engineer and duplicate a machine you own, unless the design is 17 years old”), which I have already rejected out of hand, or on… utilitarianism. Hey, someone said that earlier. (“Utilitarianism” being the system where you assume that everyone’s happiness is a scalar quantity, and then you decide that anything that increases the sum of everyone’s happiness is morally allowed.) I reject utilitarianism, too. So I can’t see how one can ethically argue for IP.
Let me condense that into a question, then, to IP supporters: Suppose you say that IP is a natural form of property right, one that gives the creator of an intellectual work the absolute right to control the use of the information required to produce this intellectual work (even if the creator carelessly allows the information to spread around the world). How do you avoid the conclusion that anyone who gets a patent (or whatever form of IP-law protection), such as James Watt, would have the right to keep the IP rights for as long as he wants, and to pass them onto his children and basically have a perpetual, hereditary monopoly on this particular invention? How can you possibly justify giving them the monopoly, but only for X amount of time, with a natural-property-rights argument?
(It occurs to me that most of the second half of this post may have already been said in this thread. Which might be why this second half suddenly occurred to me. Oh well.)
Published: January 19, 2009 5:15 AM
IP Socialists would claim otherwise because all they argue for is that they are entitled to other people’s fruit of labor.
Published: January 19, 2009 8:05 AM
Published: January 19, 2009 11:08 AM
Published: January 19, 2009 11:23 AM
Published: January 19, 2009 11:40 AM
I’ll run with that argument here and appreciate replies to this question:
What becomes of the overall profit motive for creators in the absence of intellectual property rights?Again, to further this point of view and open it for rebuttal:
An inventor may invent, an author or musician may write, and a pharmaceutical company may develop- as a farmer may grow food- just for the love of bettering society. If not all primarily for the benefit of making money, though, certainly most people labor under the gamble that they may recoup their sometimes enormous expenses.
Profit is certainly the gamble entrepreneurs make when investing in creations.
Watt wanted fortune and fame. So did his competitors. Waiting was one of the costs of meeting their demands. Perhaps better to have their inventions later than never?
If “society” wants their fruits, “society” needs to offer them an agreeable benefit (such as money, or fame, or acknowledgement of ” their IP”).
Thanks in advance for your responses!
Published: January 19, 2009 1:07 PM
Absent IP rights, the profit motive disappears, ‘entirely’! I am out of business. Everything I have created for the last twelve years is for all intents, worthless, as it is available all over the place for free to anyone unscrupulous enough to not care that they are pirating. Absent IP rights, and the enforcement of those rights, there will soon be NO profit motive for any creative work that can be easily copied in an electronic medium.
This is the end of Hollywood, the end of HBO, the end of anything other than the most mediocre ‘reality’ tv. We are entering an age where all creative work will either be old, or amateur. And I am not exaggerating in the slightest.
Of course people will demand that the government do something about the deplorable state of art, and so the government will dutifully step in and levy taxes with which to ‘publicly finance’ government approved art.
Published: January 19, 2009 3:10 PM
By that, I mean objectively identify a logical, concrete boundary (as opposed to establishing an arbitrary or utilitarian boundary) between the circumstance of IP existence and nonexistence. Criteria for a patent’s expiration certainly is arbitrary. So, if IP exists, how to go about discovering what is a logical, observable, objectively reasonable limit to the nature of IP rights as opposed to the natural limits of physical property?
And to anyone who concludes that there is no IP, please demonstrate why there isn’t.
It isn’t because logical, observable, objectively reasonable limits to it’s nature haven’t been found (ad ignorantium).
It isn’t because the implications lead to a slippery slope of ridiculous obstacles as the undeveloped notion of IP rights snowballs into a freeze of technological progress (utility).
I’m not giving anyone a hard time here. This is very interesting to me and in many years of the topic coming up, I’ve not thought about it before as much as I would like.
Published: January 19, 2009 4:27 PM
It seems to me that Peter Cohen has the firmest grasp of this issue here.
There are simple observations that hold true hear regardless of the complications that arise from acknowledging them.
IP is as natural and real as physical property. It’s natural limits seem to be what is really in dispute.
The problems with IP seem to stem from it’s limits so far being established and dictated, rather than observed.
Published: January 20, 2009 1:45 PM
like so many other government initiatives, failure merely invites calls to redouble efforts, not to evaluate the actual viability of the scheme.
Published: January 20, 2009 9:33 PM
“IP is as natural and real as physical property.”except you can’t touch it, see it, smell it, taste it..
not to worry, some god at the patents office can divine its true nature and origin. that’s reassuring.
Published: January 20, 2009 9:44 PM
I, “jimmy” rogers, repeat: “It’s natural limits seem to be what is really in dispute. The problems with IP seem to stem from it’s limits so far being established and dictated [as perhaps by “some god at the patents office”], rather than observed.”
I asked for anyone to demonstrate that there is such thing as IP by objectively identify a logical, concrete boundary (as opposed to establishing an arbitrary or utilitarian boundary) between the circumstance of IP existence and nonexistence.
Fair enough?
Published: January 21, 2009 10:57 AM
What do you think?
Published: January 31, 2009 7:57 PM