четверг, 19 января 2012 г.

The Ethics and Economics of Intellectual Property

In this post I'll try to briefly explain why intellectual property is incompatible with libertarianism and is economically harmful.

Let us start with ethics. Why do we need private property? Many libertarians believe that private property is justified by the so-called homesteading principle. That is, because someone had mixed his labour with an unowned object, the object is now her property. Since she now has property in that object she may freely dispose of it or create other objects by using it.

I don't really think the homesteading principle is a good libertarian justification of first appropriation (and the derivative ways of appropriation) because it hinges on magic of sorts. Instead, I think we may just say that private property is required for the maximization of liberty. The less private property is protected, the less liberty people in the society will have because people can't do the vast majority of the things they desire without certain physical objects and will thus be dependent on those (usually, the government) on whom property rights are conferred.

I have to say here that private property not only enhances freedom but also restricts it to a certain extent. But it is clear for me that on net its impact is freedom-enhancing, nonetheless.

What does private property in physical object entail? It entails the right of the owner of an object to restrict physical access to it. And thus it allows the owner to preserve the objective features of an object intact through time so that it could serve the owner's purposes. This idea is crucial. Property in a physical object does not protect the value of, say, a house, or its public image, the protection is aimed only at preserving an object from alteration by third parties.

It may seem on surface that not all violations of property rights in physical objects alter their objective features without the owner's consent. For example, it may seem that  if someone trespasses on your house she does not very much alter its objective features. But in fact she does. She alters for a certain period of time the amount of unoccupied physical space available in the house. The aim of property rights in physical objects makes them targeted restrictions of liberty, restrictions aimed only at preserving the objective features of the objects.

Now, let us turn to the so-called intellectual property. IP is a catch-term that encompasses a variety of rights. What is common for all those rights is the nature of the objects they relate to. These objects have certain objective features (e.g. a work of art may be made public or not) but it is mostly not these features that are protected by IP rights. Almost none of the violations of IP rights alters the objective features of intellectual objects. Instead, IP rights are aimed at protecting the desires and expectations of the holders of IP in relation to the intellectual objects, at regulation of the behavior of other people in relation to the objects.

Therefore, the difference is that an owner of a physical object has a right to preserve the object intact and her right restricts other people's rights only to this extent. The holders of IP strive to regulate other people's behavior for the sake of it, the only limitation being that the regulated behavior must somehow relate to the intellectual object. In my view, the purpose of IP rights, in contrast to normal property rights, makes the former incompatible with libertarianism.

Now, some economics. It is generally believed that limited IP is economically beneficial because without it there would have been less intellectual objects produced.

However, this is a wrong way to proceed from the subjectivist economics perspective from which nothing is inherently valuable. There are two general types of IP, patents and copyrights. The former are in their economic impact equivalent to a monopoly in the true sense of the word, a resource monopoly. Since any resource monopoly is by definition harmful, then so are patents. The same is true about copyrights with the modification that they are equivalent to subsidies.

In case of patents their holders receive from certain capital goods more than they would have received in the free market because they prevent other producers from using such capital goods. In presence of a free market in capital goods there will be a tendency for production of those capital goods that allow to produce consumer goods that will allow producers to receive profit. Although this process is imperfect, it in general allows a very good degree of coordination between the plans of consumers and producers. If certain capital goods cannot bring profit to their owners unless they have a monopoly on them, then good riddance to such capital goods, because otherwise the overall welfare will be reduced.

The same is true for copyrights. If, say, a work of literature can only be produced if people are forced to pay to its author more than they would have done in the free market, then the subsidy reduces the overall welfare compared to what it would have been without it.

вторник, 10 января 2012 г.

Why There is no Consent in a Democracy

Since the time I was translating into Russian Bryan Caplan's insightful book "The Myth of the Rational Voter" I have been thinking about the connection of the main argument of the book with praxeology and its implications.

Now I think I realized how to put Caplan's argument on a sound praxeological footing and that the restated argument has even more radical implication than those envisaged by Caplan.

The main argument in TMRV may be summarized as follows. Voters in a democracy because of their sheer numbers do not have any hope of actually influencing the outcome of elections because the probability of their votes becoming decisive is close to zero. Because of this voters don't make decisions for which candidates/policies to vote based on the evaluation of the consequences of policies they vote for. Instead, they choose to be rationally irrational and vote for those policies that make them feel good. To this Caplan adds the empirical argument that voters seem to be prone to various biases that make them feel good about voting  for bad economic policies.

The problem with the argument thus stated is that it is inconsistent with praxeology. There is no necessary logical connection in it between the voters not being able to cast a decisive vote and not taking due account of the consequences of the policies they vote for.

However, there is a way to put the argument on a sound praxeological footing. Praxeology teaches us that people choose among alternative courses of action that are known to them and, what is very important for this post, that the choosing people must believe that the alternatives are realizable.

This brings us directly to the reformulation of Caplan's argument. Because voters know that they don't actually decide the outcome of the election it means that they DO NOT ACTUALLY CHOOSE among the alternatives that are on the ballot, since these alternatives are knowingly unrealizable for them.

This is a simple idea but if reformulated it has radical implications. First of all, it implies that there is no consent, no popular rule in a democracy and there cannot be. Therefore, democracy is a form of government where voters paradoxically determine to a certain extent what happens but do so not by means of conscious choice. Thus, all the theories treating elections as choice among policies should be discarded.

What further implications does this have? I am sure there are plenty but I will outline only two of them in this post.

1) The ethical implication. The withdrawal of actual choice from democracy deprives it of the ethical defense that makes it somehow in itself ethically more preferrable to other forms of government because at least some people in a democracy give a consent to the policies.

2) The implication for libertarians. The implication for libertarians is that it is close to useless to try to advocate libertarian changes to the general populace and hope that one day the electorate will one day swing to libertarianism.