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Kinsella on Liberty Podcast: Episode 022.
This is lecture 5b (in addition to the 6 main lectures) of my 2011 Mises Academy course “Libertarian Legal Theory: Property, Conflict, and Society.” The main lectures start at KOL018.
Video, Transcript and Slides below.
This lecture’s topic is “Q&A”
For slides for the six main lectures, plus extensive hyperlinked suggested reading material, see this Libertarian Standard post. For a listing of the syllabus and topics covered in each lecture, see this Mises Academy Course Page (archived).
For more information, see my Mises Daily article “Introduction to Libertarian Legal Theory,” and Danny Sanchez’s post Study Libertarian Legal Theory Online with Stephan Kinsella.)
The videos of all six lectures plus this Q&A are also available on this playlist.
Libertarian Legal Theory: Property, Conflict, and Society, Lecture 5b: Q&A
Mises Academy, Feb. 28, 2011
STEPHAN KINSELLA: I’m reading Matt’s comment now. I don’t understand how a lack of patent protection would work in some parts of the economy, pharmaceuticals for example. Prices are inflated. Okay, what were the incentives for these companies to extend large amounts of capital? Okay, well, I think I know where you’re going. I’ve heard this. Let me just answer this in a couple of ways. First of all, I don’t know if you’ve read a lot of Rand and others on the anti-trust question, for example. Okay, let me read the rest of it.
Okay, well, I would say first as a libertarian, our view is moral. Our view is moral. That is, the question is primarily who has the property right. So, for example, on anti-trust, a lot of utilitarian-type free market types would say – they have the arguments for why you don’t need anti-trust law. But they’re not really against it in principle if you do need them. They just think that there are good economic reasons to think that anti-trust is not necessary because companies can’t really collude that successfully because of the nature of the market.
But a more principled view is but companies have the right to collude. They have the right to fix prices. As long as they’re not violating anyone’s property rights, they have the right to do that, and I think that’s the fundamental approach to IP. Why do you have the right to tell me I can’t use my own property in the way that I see fit, even with something, my own invention, which is what patent laws do?
So if two companies are competing and they’re trying to find this wonder drug and they both find it around the same time, the first one who gets to the patent office can stop the other one from using their own idea. Why is that just? And I don’t think saying – asking a question, well, what’s the first company’s incentive to invest in this R&D? Asking a question is not an argument. I’m not being critical of you. I’m just saying it’s not an argument, and asking a question doesn’t justify the use of state force against my property rights. I mean it just doesn’t. The only thing that justifies that is if I commit aggression, and the competitor hasn’t committed aggression. They’re just using their own property as they see fit.
Now, I would highly recommend that you go to the free online copy of the book by Michele Boldrin and David Levine called Against Intellectual Monopoly. You can find the link on the resources section of C4SIF.org/resources. There’s a link to their book there. There’s a chapter on pharmaceutical patents, which is always trodded out as the best example of why we need patents. And they do a great empirical case just showing that actually it is not in practice in today’s world that useful, or sorry – that it’s not essential. You have to read it. It’s thorough and just devastating. They show that a lot of the cost of patents are for advertising or for things that are not protected by patents, etc. So take a look at that.
And second of all, I would say this. Just as sort of a common-sense matter, we have a situation where we have the state, which hampers human life in a severe way. It imposes untold cost on companies: regulations, the FDA process itself, taxes, inflation, export and import controls, all kinds of things like this, which totally – like a huge weight impressed upon these R&D companies. Just imagine if we could cut the corporate income tax rate by 90% and the income tax rate on personal people, on individuals by 90% so that they would be richer and have more money to spend on these drugs and things like this, and it would be cheaper to hire employees if you didn’t have pro-union legislation and environmental laws and all these things. They would have so much more money in the first place that they would have a lot more money to spend with R&D.
And to – the idea of entrusting with the state, which imposes all these penalties and drags and weights on companies and on innovation and progress, to give that – to ask that state to give me a monopoly that I can use their state courts for to harm my competitors for a temporary time so I can charge a slightly temporarily monopoly price for my product to make it a little bit more attractive is insane. I mean you don’t trust these criminals to do that, and if the state is imposing cost upon cost upon cost upon cost upon you, why would you not want to just say get rid of these costs instead of saying give me a temporary monopoly where I can have a little bit higher profit to make up for all the costs you imposed on me?
Just stop imposing costs on me in the first place. So that’s my primary view on that, and as a practical matter, I mean just imagine this. You go down to the store. We’ve all seen this. You’ll see Tylenol for $6 and generic acetaminophen for $3, half the price. Some people buy Tylenol. Some people buy acetaminophen. Why do some people pay twice the price? Because they trust the brand name. I mean there’s an advantage to being first to market. There’s an advantage to your reputation and your name. There are spillover effects. There are any numbers of reasons why you want to make money – why you would engage in R&D.
Julian: Why should I not share the key to your course via Facebook? Well, I would say it wouldn’t be morally wrong because you can have – libertarianism doesn’t pretend to be the sole source of ethics in society. I mean there’s personal morals and there’s reputation effects, and there are personal commitments and promises. And there’s also contracts, and you could say – I mean I don’t think we do it here because we don’t care too much. I mean we’re not worried about it. Mises is not into – is not a money-making organization, not that there’s anything wrong with making money. They’re trying to spread the word of economics and liberty and truth and all this, and that’s why we open up so much for free.
This course is – the Mises Academy is done in a – we’re selling a service where there’s an instructor with personalized information and back-and-forth and things like this. And to get these professors to teach, they want to let them have some – a little profit to induce them to do it. So this is the one thing they do that they charge for, and they don’t open up to the world, and there’s a practical reason not to open it up. Now, why shouldn’t you do it? I mean if we had a contract, then you’d be in breach of contract. I don’t think we would do that because we don’t care too much because we kind of trust people, and we’re not really worried about it.
I mean if people started doing that, I think we would just change the system a little bit, and make the – change the code every week, something like that. I did talk about this earlier. Someone asked that question earlier. So I’d say it’s sort of just bad form, but that’s not a libertarian issue. That’s more – yeah, you could make a contract. You could say – I mean if you wanted to, you could have a contract that said every student who signs up agrees to pay $1000 damages to Mises if you reveal the key. I mean I don’t know, but you could do things liked that, but there’s always the choice is that alienating your customer when you do things like that. And I’m talking about a pure profit-type thing, not just something like this. So I mean if you want to release it, go ahead. I mean you might get booed by your fellow students, and then we would have to change the code.
One problem is – in Bob Murphy’s course, by the way, someone did that apparently, and there was a troll in the room, and they had to find a technical way to get around him. He was – every other comment he was saying Austrian economics sucks. Bob Murphy sucks. I mean it was just – some troll was actually in the room. So I would think the students who are really interested in this wouldn’t want outsiders involved who are going to interfere with the lessons they paid for.
Anyway, Atchafalaya: Your thoughts on logos. I was trying to utilize NFL logos for an event and got shut down for IP reasons. How do you view – okay, so that’s a good question. That’s a trademark issue. Let me explain. A trademark is a mark that is used to identify the source of a service or a good, nothing wrong with using a trademark. This is what people would do. It’s just the same thing as using your name, saying I am – I’m John Black, and I’ve had this job and this circle of friends, and this is my reputation, and please hire me. I mean people use names as identifiers. In my view, in libertarianism, in a libertarian society, the only type of trademark right you would have would be basically based on fraud.
So if I – let’s just say Coca-Cola. There’s a Coca-Cola company, and they’re selling a certain Cola product under their name, Coca-Cola. Now, if I make a knockoff of Coca-Cola and I’m selling it to people as Coca-Cola, but it’s not genuine Coca-Cola, I’m defrauding these people, and they should be able to sue me, which is why I think this would never be a major problem because you’re only going to have fly-by-night operators who are doing this because they’re going to be sued for fraud. The problem with trademark law is that it gives the right to sue to the original trademark owner, not to the customer.
Now, in my view, the trademark owner is not – he’s not violated. He’s not harmed because he doesn’t have the right to the customer’s business. If the customer wants to change his mind because he – for whatever reason, he has the right to do so. So Coca-Cola doesn’t have the right to sue. Furthermore, trademark law is not always based upon fraud, so for example, if I sell you a $20 Rolex, which is a knockoff, now you’re not defrauded because you know you’re buying a fake Rolex. This is common. Rolex can still sue me even though there’s no fraud and there’s no consumer confusion. So I think it should just be totally a fraud-based thing. I think trademark law should be just basically abolished and replaced by pure fraud law.
Oh, Julian, I’m not saying it’s personal, but maybe I misunderstood your question. Well, let me read – hold on a second. Let me read your question again. Why should you not share the key to the course by Facebook? Well, I think if you understand the purpose of this Mises Academy system, it would be immoral because you know that there’s sort of a gentleman’s agreement-type thing here, which is – it’s a moral thing outside the realm of pure libertarianism, but it’s contemplated by it. I mean people can have morals. I just think it would be bad form because you’d be damaging what people are expecting here.
And if people don’t cooperate, then we might have a worse course, and the whole Mises Academy might not work. I guess that’s the reason. But there’s no penalty for you to do it if that’s what you’re asking, no official legal penalty. And I would not be in favor of that. I mean if someone did that, I would just say, well, we have to find a different way to – find a cost of exclusion to make this course work because I wouldn’t teach this course if I didn’t make a little money off of it, but I’m not doing it for money really. I’m doing it for fun and for the experience and to interact and to spread the word. So if we can’t find a way to make it work, then we’d have to find some other way. So – I don’t know. I don’t know if it was Krugman or not.
Okay, Atchafalaya: Only I pretended to be officially representing the NFL organizations, I would be fraudulent, no? Yeah, if I understand the hypo you’re giving me, yeah, I think that’s correct, and I think that we would have to have a strong presumption of caveat emptor. In other words, look. You’ve got to treat people as a grown-up, and if you’re having an NFL slogan – logo on your booth or whatever you’re doing, people shouldn’t assume that you are saying you’re authorized by the NFL.
I mean if you put on there “officially authorized by the NFL,” in fact, let me go back a couple slides. This is – you should take a look at this post here by – about Nina Paley’s idea – Karl Fogel’s idea of the creator-endorsed mark. So if you actually say I authorize the use of this and they put it on there, and then if they didn’t, that would be a trademark infringement.
Some people are leaving, by the way. We’re at 9:30. I don’t mind personally staying much longer, but I’m afraid to cheat some people out of the discussion who left at the course time, although they can watch the recording later. So let’s not go too much longer, maybe, say 10 or 15 minutes max more, but go ahead. We’ll see how it goes.
Okay, Julian’s question – well, this is basically the contractual copyright scheme that some have proposed, and it’s somewhat related to Rothbard’s idea. And your question is, in the libertarian world, could a music company make a contract with each CD buyer so you’re not allowed to copy the CD? Yes. I think they could do that, but if you remember, number one, let’s go back to our contract idea.
Contract is not binding obligations. It’s just a network of transfers of title to property. So in other words, if I buy a CD and I agree to this clause or provision you’re talking about, I mean I have to agree to some consequence if I do copy it. So really the contract just sets up a payment of money from me to the music company if I copy the CD and if they can prove that it, I guess. The cost of the song is 99 cents. I don’t know. Of penalties [no audio_00:15:41].
This is – that’s another reason they wouldn’t even try. I mean they’d know that it’s futile to even try to do this. And in a libertarian world, you wouldn’t have government snooping and subpoenas and all these injunctions and orders from courts to even try to go on a fishing expedition to figure out this in the first place.
How do I view proprietary software code? I don’t know. What do you mean how do I view it? I mean proprietary means different things. Do you mean DRM’d? Well, I mean of course I’m against it because software – I’m not against DRM and I’m not against password-protected software, or you have to have the encryption key to unlock it or the code. That’s fine. If you want to do that, that’s fine. I mean like in this course, you have a passkey. But proprietary usually means you own it. Proprietary—you’re the property owner.
And that is – you’re only the owner of it if there’s IP, which is patented. So patent and copyright, primarily copyright, are the two IP types that cover software code—software code itself. I mean without patent and copyright, you would not need copyleft and GNU and, in fact, it would make no sense because those are all licenses, and a license is just permission. That’s what a license means. I don’t know. I mean creating a false encryption key would be fraud.
I don’t understand. Give me an example. Who is creating the key and giving it to who? You mean like if I’m fake Microsoft and I sell a bootleg copy of Windows, and I say if you pay me the money I’ll give you the key, and then but I can’t give you the key because I’m not the original vendor. So it’s just a scam, you’re saying, just a scam by a – I think that would be some type of fraud or some type of theft, sure. But that’s another reason why reputation would be more important in a patent-free and a copyright-free world.
You wouldn’t buy from some Joe Blow on the internet who you don’t know. You would use trusted systems like an Amazon or some vetted software-distributing network, or you’d use the – go to Microsoft.com and use them, whatever. Alexis, I think he was envisioning some software vendor who was a pirate who was pretending to have a key but they didn’t, so they’re just stealing the money.
So Locke says you get your money if you mix labor with it. Well, that’s a good question, and I actually think you kind of hit on what I have myself seen as a big problem with the entire Lockian framework. So Locke – I mean Jessica, I can’t say whether it’s wrong. I mean that’s an ethical question. I don’t think it’s wrong, but that’s because you could imagine a similar license in a copyright-free world, and then it would be a contract breach to do it. But would that be a likely restriction that would be placed on you? I doubt it.
Anyway, let’s go back to this Locke question with Julian. So what Locke says is that you own yourself, and therefore you own your labor, and therefore you own whatever you mix your labor with, which was previously unowned. The problem with that argument is that it’s crankish because to say you own yourself is not – I mean what is yourself? I mean I don’t know what myself is. I know that I have a body, and every human has a body, which is a scarce resource, and then there are sometimes scuffles and squabbles over these bodies.
There’s never a fight between two selves. There’s a fight between people trying to control or hurt each other’s bodies without their consent. So to be a self-owner means that you are the one who has the right to control who gets to use or touch or do something to your body, so that’s all self-ownership means. Your labor is just one of the activities you can perform with your body, so it’s an action.
Now, would you say you own your actions? I mean I don’t even know what that means. So I don’t really know what they mean when they say you own your labor. It’s not a substance. It’s just a thing you do with your body. So to say that you own your labor is just – it’s a failure to be precise in thinking. Rothbard pointed out that we do not [no audio_00:23:15]
Sorry about that. I hate when it does that. I don’t know why it does that. Am I back? No, so okay – am I back? Hello? Test. Test. So I think Locke is actually correct in his basic argument, but he has an unnecessary step. Instead of saying you own yourself; therefore, you own your labor; therefore, you own what you mix it with, I think a more direct argument is better. Just skip that and just say, look. If there’s an unowned resource out there and you were the first one to claim it by appropriating it, by mixing your labor with it, that’s fine. It’s a metaphor.
But that means you transform it, or you use it. You possess it, and you put up borders around it. You demonstrate that you want to own it. Sorry, not just temporarily possess it. Then, by doing that, you establish a better claim than anyone else. So the reason is because any time there’s a dispute over property, one of the people claiming it is a late-comer with respect to the earlier possessor.
And, in my view, the very idea of property, which is that you have the right to continue to use something that you were a previous possessor of not just bare possession, not just might makes right, not just the right to use it as long as you have it, but the idea that you have the right to settled possession of it, the right to possess it. That very idea implies that whoever has it now has a better claim against someone who comes later and tries to take it. That is, a late-comer has a worse claim than an earlier-comer. That is why the first guy to own it has a better claim than anyone.
That is why homesteading works. So I think Locke is correct. He just includes these crankish notions of labor ownership, which I think was part and parcel of this quasi-mystical, confused idea of labor, which results from overreliance on metaphors, not scientifically clarifying the concepts that you’re using and not being specific enough. I don’t want to be harsh on Locke. I mean he was great, and he was not standing on the shoulders of giants like we are now.
Yes, not just transforming. It’s basically – I think the fundamental concept, which is what Hoppe says, is embordering, which is setting up borders, somehow, doing something with this resource to show the world that you are claiming it as yours—putting a fence around it, plucking the apple and putting it in your possession. All these things are signals or signs that to the world that, ah, that’s that guy’s property.
So now, I can navigate around it and leave him alone and let him use it in peace, and I’ll go get my own property. So – and in fact, I believe that this confusion about labor also was mixed in with Adam Smith’s ideas about the labor theory of value and which led to the Marxian ideas about alienation, and all their class warfare between employers and the laborer they call it, the workers, and the labor theory of value itself. So I think that this whole fixation on labor is unscientific, overly metaphorical, confused, and has led to, in political theory, the intellectual property and reputation rights mistake, and in the realm of economics, has led to Marxism and bad economics.
I’m actually not sure where this – I don’t know if Locke is the one that came up with this labor stuff. I mean I think he was part of the milieu at the time, and I’m not a big historian, so I’m not sure where it came from. I think it was around before him. He was kind of putting it together. And I’m not sure about the transmission of those ideas from him to Adam Smith in the economic realm, but there’s some connection I believe. Yes. In fact, I think creating is a bad – I think what you create is you create value – sorry, you create wealth by transforming things that you own already.
You could say that in a way an unowned piece of land doesn’t exist in a praxeological sense until someone regards it as a good and homesteads it. But that’s hyper-subjective, and so you could say as soon as you homestead it you create it because it wasn’t really good before. You just caused it to come into existence as part of the universe of goods by regarding it as a good.
This is the subjectivism of Austrianism, which is good, but you take it too far you and you become hyper-subjectivist, and I think it’s just complete nonsense to say that you create a piece of land by homesteading it. No. I think what you do is you appropriate it. You appropriate it.
But I think you appropriate it by embordering it or fencing it, yes. That is my view. That is Hoppe’s view, and if you read in his chapters one and two of A Theory of Socialism and Capitalism, he goes into this a lot. It’s really good. Anything else? Well, I agree. That’s why I say embordering, embordering in general. For land, it would be fencing. For other things, it would be a different type of embordering.
Matt, that might be some pragmatism. I mean pragmatism is not always bad. I mean there’s a practical aspect to all this. We all want to get along. We all want to find rules that we can use to have prosperity and cooperation and peace.
Okay, let me answer this question, and then I will bail out too. But for the value question, the point is that you cannot own value to things. You only own the physical integrity of property that you own. The value – I mean you don’t need to own the value of how you regard it. You can regard it however you want. But the value of how it’s regarded by outsiders, that’s how they regard it. You don’t have the property right to how they regard it or value it. So there cannot be any property right in the value of things because that would be like the property right in other people’s brains, how they think about or regard your stuff.
Anyway, let’s call it an end. I’ve enjoyed it tonight, and feel free to – oh, oh, I have to make one announcement. I’ll send it on the list. I am going to Ohio for a Federalist Society debate on Wednesday, so I cannot do the regular Q&A at the same time. I’ll be on a plane. So I’m either going to do it earlier in the day on Wednesday or perhaps I will do it on Friday. I’ll post on the list and ask everyone what they prefer. So goodnight, everyone, and I will talk to you all the next Q&A sometime this week. Bye-bye.