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KOL176 | “Rethinking Intellectual Property: History, Theory, and Economics: Lecture 5: Property, Scarcity and Ideas; Examining Rights-Based Arguments for IP” (Mises Academy, 2011)

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Kinsella on Liberty Podcast, Episode 176.

This is the fifth of six lectures of my 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics” (originally presented Tuesdays, Mar. 22-April 26, 2011). The first lecture may be found in KOL172.

Youtube and slides for this lecture are provided below. The course and other matters are discussed in further detail at KOL172. The “suggested readings” for the entire course are provided in the notes for KOL172.

Lecture 5: PROPERTY, SCARCITY, AND IDEAS; EXAMINING RIGHTS-BASED ARGUMENTS FOR IP

SUGGESTED READING MATERIAL

See  the notes for KOL172.

Transcript

Rethinking Intellectual Property: History, Theory, and Economics—Lecture 5: Property, Scarcity and Ideas; Examining Rights-Based Arguments for IP

Stephan Kinsella

Mises Academy, April 12, 2011

00:00:00

STEPHAN KINSELLA: … like he usually does.  How is everybody doing tonight?  Is everyone – is it night for everyone?  Do we have any foreigners here online yet?  I don’t see a way – Gwen wants to know about popping the media to your panel.  I don’t see a way to do it, so what we’re going to do is I’m going to share my desktop later when I get to that video, so that’s down the line.  So let’s get going.  I spent actually a couple of hours today on a blog post, which we’ll get to shortly.

00:00:43

So today we’re going to focus on sort of the libertarian Austrian framework that you need to have to look at all this stuff the right way.  We’ve kind of gone through the conventional views, the sort of confused natural rights views for IP, the utilitarian views.  But now let’s approach it from the ground up the way it makes more sense.  Oh, I didn’t change the date on this slide.  It’s not December 10, but everything else has changed.  Sorry about that.  Okay, I’m going to go through a few posts I did on C4SIF in the last seven days, and also I left a few in from the last version of this course because they were pretty substantive, meaty posts that make good material.

00:01:30

What I’ve been doing actually is I listen the day before these lectures to the one I gave on the same day last course to kind of remind myself of what I covered that wasn’t planned.  And that way I can gradually improve these.  But anyway, and I decided to leave some of the things in, but we’ll get to those in a second.  So the post I spent a lot of time on today was this one here, the first one, “Mossoff: Why Business Leaders Should Care About Intellectual Property.”

00:01:58

This is on slide two.  By the way, can everyone see and hear me okay?  Anyone – anyone?  Sound okay?  Too loud?  Too quiet?  Or is it all right?  Fine, good.  This is the shirt, by the way, I was given when I went to Austin and gave a speech on IP.  Norman Horn gave me this and Coke paid for it so I’m happy about that.

00:02:24

00:02:27

So Adam Mossoff is a law professor at GMU.  He’s an objectivist.  He’s one of the few people still trying to come up with a way to justify intellectual property and in particular from the objectivists or Ayn Rand’s point of view.  So if you want to read that post, I kind of go through a lot of problems with his speech.  He gave a long lecture, and it’s just full of confusions and errors, and I think most of you just from taking this course, you can see a lot of the mistakes he makes.

00:02:58

He makes the mistake of basically assuming there’s a property in value and also of assuming that you create a thing called value that you have a property right in without recognizing that what you really do when you create or produce is you transform with your effort owned property that you already own, and you make it more valuable.  So property rights don’t really factor into the new wealth that you created.  The wealth is just the more valuable configuration of your property that you’ve transformed with your effort.  So there’s a lot of other just one mistake after the other in his talk, so take a look at that.

00:03:43

Someone emailed me today and said why are you wasting your time on this guy?  And I said, well, there’s not many more people left to debunk.  There’s really not many good arguments for IP, as I think we’ve seen in this course and as we’ll continue to see throughout the rest of tonight’s lecture.  Kevin Carson, who’s a mutualist left libertarian, had a kind of provocative little post comparing the arguments for intellectual property to the arguments for slavery.  And I think he’s got a good point.  I mean they both involve owning – telling other people what to do with their bodies and their property.  Take a look at that.

00:04:22

My good friend, Jacob Huebert, who wrote the great book Libertarianism Today – it’s a fairly recent book.  And he’s got a great chapter on IP in there.  It’s a great overview and synthesis.  Well, he just did a debate himself at Whittier Law School.  He actually got me invited to Ohio, where he’s from, a couple of months ago to speak before the Federalist Society on IP at Ohio State Law School.  And he just did his own debate at Whittier Law School, and he does a really good, excellent 15-minute presentation.  So if you just listen to that.  His approach is a little different than mine, but we agree completely.

00:05:00

He’s very solid.  He’s a really good speaker.  And just like when I debated someone, his opponent was I mean just pathetic.  His opponent was better than mine actually.  His opponent at least tried to come up with an argument.  But he’s just another lawyer software guy and doesn’t really have much of an argument.  In fact, in the middle of it, he even says I don’t really believe everything I’m arguing here, so he’s just trying to come up with arguments.  My opponent was just an amiable, nice patent lawyer who really had no arguments whatsoever except I think we should reform it but not get rid of it.  I mean that was his argument.

00:05:35

So I haven’t posted on Atlas Shrugged, the movie.  Many of you might have heard of that.  I haven’t seen it yet.  I don’t know.  Has anyone here seen the movie, Atlas Shrugged, by the way?  I’m curious.  Gwen says she’s seen it.  Well, thumbs up, thumbs down?  How many stars out of four would you give it, Gwen?  I’m curious.  Wow, 4/4.  It’s getting polarized reactions.  My wife wanted to see it this weekend with me because I pumped her up about it.  But then I read some of the negative reviews, and I thought I might wait for the video because I didn’t want to take her there and have her disappointed.  She’s not as much gung-ho as I am.  Anyway, there was an interesting thing about this movie.

00:06:15

Some of you may or may not know.  So this movie has been sort of back and forth for years about whether it was going to be made.  Gwen says it was excellent given the limitations they had to overcome.  That’s what I wanted to talk about is the – why did they have limitations?  They had limitations because I think Leonard Peikoff had licensed the movie rights to the novel to some producer, and they were about to expire because they actually had a big movie deal at one point with Angelina Jolie and others, but it fell apart.

00:06:46

So the movie rights were about to expire, and unless he started production on a given day, they would expire.  So I think he contacted Peikoff and he said can I have an extension.  Peikoff said no because Peikioff’s a typical objectivist and surly and not cooperative with people.  And so he denied him permission, so the guy had no choice but to start production last minute, so it was kind of a rushed production, lower budget than normal, bunch of no-name stars.  That might have helped it in some ways, but anyway, if it suffers because it was rushed, it’s because of IP, because without IP, the movie would have been made a long time ago.  And it wouldn’t have been a rush.  In fact, many versions may have been made by now.  So it’s kind of ironic that Ayn Rand’s movie, the movie version of her beloved novel, may have been hampered or at least diminished because of IP, which she supported.

00:07:42

This is just a little quote I came across from doing some reading, a case – a district court – a federal case from 1995.  And this is just common wisdom.  Everyone knows this except libertarians who argue for IP and claim that it could arise in a common law system.  Unlike – I’m going to quote here.  “Unlike contracts, copyrights and rights flowing therefrom are entirely creatures of statute…”  Well, that’s what I’ve been arguing the whole time.  Patent and copyright are creatures of statute.

00:08:09

They could not exist without legislation unlike contract rights and property rights and inheritance rights and marital rights and even crime and punishment, which arise naturally in a decentralized legal system.  Gwen says I think Atlas was more limited by the ideological barriers from Hollywood fighting against it than its IP limitations.  Could be, could be right.

00:08:33

Okay, next page.  Oh, this was one.  “Google to sentence YouTube violators to ‘copyright school.’”  So now Google is – and they’re doing this reactively.  They’re trying to stay out of trouble, but anyone who’s charged with YouTube – posting YouTube videos that violate copyright, they have to take a copyright education class.  And I think it’s just horrible.  It reminded me of one of my favorite quotes by C.S. Lewis, one of my favorite authors.

00:09:06

And he criticizes this sort of rehabilitation mentality we have in society now.  It’s one thing to punish someone for committing a crime, but to try to reform him can be monstrous.  And I’ll just read a bit of this quote here.  You can read the rest later.   “Of all tyrannies, a tyranny sincerely exercised with the good of its victims may be the most oppressive.  It would be better to live under robber barons than under omnipotent moral busybodies.  The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated, but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”

00:09:46

Anyway, so that’s a great quote, and it sort of reminded me of this Orwellian education mentality.  I also spent a good deal of time using some of the material I’ve developed in this course, which you’ve already learned most of, to develop sort of looking at the four sort of historical periods or phases of IP abolitionism, all the arguments.

00:10:13

And take a look at that, but most of it will be familiar.  The first phase would have been the one that Machlup outlined in the late 1870s.  Remember we talked about how there was a lot of agitation against IP, arguments back and forth similar to the ones we’re having nowadays, until that panic of 1873 caused the free traders and their opposition to patent and copyright and their opposition to protectionism to be in disfavor.  And when that happened, the opposition to patent and copyright sort of crumbled.

00:10:45

Thank you, Danny.  The second phase of IP abolitionism you can – I would say it would be this vigorous period of debate by these left individualist anarchists like Benjamin Tucker and his crowd around his magazine called Liberty in the late 1800s.  So there was a vigorous set of debates there, and Benjamin Tucker was excellent on this stuff.  It’s amazing how good he was so far back.  He was better than all the rest, better than Spooner, better than Tak Kak, and the other guys.

00:11:20

And then I’d say the third phase would have been the sort of modern renaissance in the 1950s to the, let’s say, 1980s of free market economists and libertarians like Murray Rothbard, Wendy McElroy, Tom Palmer, and then economists like Fritz Machlup and Arnold Plant, pretty much all coming to the conclusion – Hayek, by the way, arguing against IP.  But they kind of made comments, and then they’d disappear because IP wasn’t that pressing of an issue.

00:11:52

And then finally I think we reach our current age, which you can mark as starting around 1995 for three reasons.  Number one, ’95 is when you can kind of say the internet started its current dominance, and when the internet started and digital copying and digital information became more ascendant, then the problems caused by IP—copyright and event patent—became more obvious and exacerbated.  And then also ’95, I wrote my first article against IP, and I’m sort of in the new generation of anti-IP writers, and so did Roderick Long who’s got some great stuff on that.  So ’95 you could say, and then it started picking up steam around 2000-2003.

00:12:35

So I’d say the last seven or five years has been really the full flowering of a strong movement against IP.  Most libertarians you might now that are principled and Austrian-related or anarchist, they’re pretty much – and the young people on the left, the left libertarians, the amount of IP opposition is just astounding and awareness too.  I mean you hear sophisticated arguments from all these commenters on the blogs.  Now, they’re all reading all this stuff, my stuff and Roderick’s stuff and all the stuff out there.

00:13:09

I mean the case is not that hard to understand, but it’s complicated, but it’s – I think really the defenders of IP are on the ropes, and I think they know it, at least among libertarians.  These are some older posts from my last incarnation of the course.  The first one, you might want to take a look at the first link.  I’m on slide four now.  By the way, I have posted these slides.  Danny, they are all in the course materials.

00:13:39

I don’t know if anyone wants a Google Docs version of them to link to, but these slides are on the course page.  Sorry, I should have mentioned that earlier.  So the first post here is “Property Title Records and Insurance in a Free Society.”  And I wrote that, and take a look at it if you’re interested in that.  I kind of went into some detail about the history of – and the libertarian theory of how – what property title means, how it would be recognized, and what the state’s relationship to it is.  And the reason I wrote this is in the IP context is that quite often IP proponents will say, well, you don’t need legislation to have IP.  It would just evolve naturally.

00:14:28

And quite often they’ll say, well, people would just have a private title registry, and they would register their title to this invention or to this copyrightable work.  And I went into this to show that that’s such an unworkable idea, and that’s not how property works.  I mean originally property works by visible or observable, physical boundaries or borders.  I mean people would actually put stones down.  They still do sometimes, markers down to mark where their land is, and if someone has a coat or a stick, you can actually see that they have that.  You can see what its borders are.

00:15:07

When society gets more sophisticated, certain things like immovables or land, real property some people call it, you tend to register that.  And the law develops where I can sell you a moveable, that is, just like a personal object like a cow or a watch.  I can sell that to you manually by handing it over, or we could even have a verbal contract – I’m sorry, an oral contract about it and that suffices.

00:15:43

But certain formalities and rules have arisen, which are understandably so, for things like land.  So you have to have a contract to transfer land in writing.  So the only way someone’s going to get title to land now from a previous owner would be either something in writing or if they squat on it and basically – for 30 years or something or 20 years or 10 years, whatever the period is in that jurisdiction without the owner objecting, and then they would own it by prescription or statute of limitations.

00:16:14

By the way, just as an aside, I mentioned this before in another class, and I hope I haven’t mentioned it here already.  If I have, just stop me.  But I mentioned the oral contract before.  You will always hear people say oral contracts, but it’s actually the wrong terminology.  Well, actually, oral is correct.  They say verbal.  They’ll say a verbal contract, but verb just means a word, right?  All contracts except manual contracts where I hand you a dollar and you hand me a candy bar, there’s nothing exchanged.  It’s just meaning is exchanged, but most contracts are verbal in that words are used.  Now, the words can be spoken, or they can be written.  If they’re written, it’s a written contract.  If they’re spoken, it’s just an oral contract or an oral understanding.

00:17:00

Okay, the other thing I mentioned was I called land immovable.  This may be helpful for you to know.  It’s not too relevant to the IP course, but it’s a good thing for libertarians and people interested in legal theory to know.  There are two major legal systems in the world today.  There’s a couple of others.  There’s Islamic law, and then there’s Jewish law and Asian law, which is kind of based upon one of these two main types, which is civil law.

00:17:29

So the two main types of law in the world today are common law and civil law, sometimes called continental law.  So the common law is the current version of the law in England, the United Kingdom, and the commonwealth countries that arose from England—US, Canada, Australia.  Now, there are some exceptions actually.  In the UK, which is Great Britain and Northern Ireland, so Northern Ireland is one country, and then Great Britain has three sub-countries—England, Wales, and Scotland.

00:18:09

Scotland is actually a hybrid regime.  It’s sort of a civil law regime.  So is Louisiana in the US, and so is, I think, Quebec in Canada and so is Puerto Rico because Puerto Rico is from the Spanish – so South America, Latin America, and most of Europe are all civil law.  So you have common law countries and civil law countries.  The civil law countries basically come from codifications about 200 years ago of the current European customary law, which was based upon principles of Roman law.

00:18:47

Now, the Roman law was in place in Rome obviously for about 1000 year and is older than the English common law.  But actually the Roman law is similar to the English law in that they were both sort of decentralized legal systems, decentralized legal systems, Roman law and common law.  In fact, the Roman law influenced some of the common law.  If you see Blackstone’s treatises, you’ll see that it’s organized along the lines of one of the famous Roman scholars, Gaius, in his Institutes.

00:19:20

Anyway – but the difference nowadays between the civil law and the common law is that the civil law took the Roman law rules, which were similar to the common law rules except they had different names, different words, and different concepts but similar in substance.  Contracts would be respected.  Property is to be respected.  There’s rules for marriage and divorce, all this kind of stuff.  And civil law took these rules and codified them, and then the legislature adopted them and made legislation the prime source of law.

00:19:57

So the key hallmark of civil law, continental law, half of the modern or the western world today, is that it’s legal positivism, legislative supremacy.  The idea is that the legislature is supreme and that case law was to be minimized.  So at first it was a big difference in sort of philosophy of these two systems.  But in the last couple hundred years what’s happened is the common law in England and America and other western common law countries has gradually been supplanted by legislation as well.

00:20:29

Congress passes tons of laws every year.  State legislatures in the US pass lots of laws.  And they gradually encroach upon the domain of the common law, that is, a judge-made law, so that these – in a way, those two systems are converging.  The civil law systems and the common law systems are converging.

00:20:47

Anyway, that’s just a side note, but the reason I brought it up was because property is called immovable property in the civil law.  But a real property—that’s land I’m talking about—in the common law and personalty in the common law or immovable property in the civil law.  Anyway, just a little digression there.

00:21:05

Actually, there’s a way to classify intellectual property by this scheme.  Intellectual property is – I think they call it an incorporeal – in the civil law an incorporeal moveable.  Now, I don’t know how you know that intellectual property is moveable.  I guess because it’s not land.  So I think it’s strange to classify something that has no body, but they call it incorporeal, which means no corpus, no body.

00:21:31

This is an older post too, but I like some of the quotes I collected in it.  Take a look at the quotes from Reichman.  Now, these are conventional, mainstream, regular scholars, and they’re in favor of IP.  They’re not trying to hide it unlike some libertarians like objectivists who try to fight this.  They try to say it’s a natural right, etc.  It doesn’t have utilitarian basis.  Almost everyone that’s in favor of this recognizes this.

00:22:00

Here’s a guy named Reichman.  I think it’s Jerome Reichman.  “Governments adopt intellectual property laws in the” – I’m on slide four.  I’m reading this quote here.  “Governments adopt intellectual property laws in the belief that a privileged monopolistic domain operating on the margins of the free market economy promotes long-term cultural and technological progress better than a regime of unbridled competition.”

00:22:26

So he’s explicitly admitting this is the major justification given nowadays for these laws, and you could see he’s describing accurately what it does.  Basically, it limits competition.  It protects people from competition.  Now, usually capitalists and libertarians are not ones that complain about competition.

00:22:47

In fact, as I mentioned on that blog post today I did, on the Mossoff blog post, in Atlas Shrugged you will see Ayn Rand putting into words of the villains like the dog-eat-dog competition law.  I mean this is what the bad guys do.  They criticize dog-eat-dog or unbridled competition.  But this is what IP laws are designed to do to stop or to limit, to put limits on unbridled competition, so it’s just another form of protectionism.

00:23:16

Here’s another one.  Oh, I must have cut off her name.  I think it’s a – let me go to slide five and see if I’ve got her name here.  Oh, I think that’s more from Reichman, sorry.  I’ll just skip that quote.  Go to the next page, slide five.  Here’s Alan Devlin, another scholar.  “The patent bargain is an easily understood concept.  Awarding the inventor 20 years exclusivity naturally entails considerable social cost.”  See, so he’s admitting that there’s a big cost to this.  “A cost that rises in direct proportion to the value of the covered invention.  In certain cases—those where the patented technology is so useful that there are no substitutes—the award of a patent creates a complete economic monopoly.”  He’s admitting it, so he’s admitting that there’s a cost, that these things are monopolistic sometimes leading to a complete monopoly.  This is, of course, true.

00:24:13

New York Law School Professor Beth Noveck, she said, “A patent is a pretty significant monopoly, so we want to make sure we’re giving it to the right people.”  Now, this is just horrific to the libertarian to hear these conventional mainstream people talking like this about manipulating people’s lives and their rights and using the government to tweak things left and right.  But this is how they think about it, and this is the nature of these monopolies.  And for libertarians to defend it, I think they have a lot to reckon with to – because they’re on the same side as these people.

00:24:46

00:24:52

These are some older ones.  These are older posts we can skip now so I’ll have time to get to the other stuff for today.  This is an older post I wanted to point to.  I think I’ve mentioned it before, and we’ll talk about this next class when we talk about a future world, future IP-free world.  But I do have a post collecting some ideas about ways you can fund innovation today, and maybe you could extend this to an IP-free world.

00:25:24

So there – just take a look at these.  There’s micropledging services.  There are – Kickstarter is a way you can get people to contribute or agree to fund a project ahead of time.  Also, this is an older post as well, but it’s interesting.  You might want to click on this link and take a look at it.  I got this from the book called The Master Switch by Tim Wu.  He’s the guy that invented the term net neutrality apparently.  He’s just another conventional law professor, tech kind of guy.  He’s a little bit skeptical of patents and copyright.  He’s not completely opposed to it, but he would like to reform it, and he sees a lot of problems with it.

00:26:05

And there was another post I think I linked in here too, but it’s fascinating to see how patent and copyright, especially patent, had a huge impact on the current movie industry that we have today in the US, the Hollywood movie industry, how they – some of these studies have actually moved to Hollywood to escape the patent influence they were suffering from in New York and other places, and then how they’ve organized themselves the way they’re organized now, again because of patents.

00:26:41

It’s fascinating to see what a distorting effect that IP has had on society and culture.  And if you remember, I talked in a previous lecture about – the one about the Omega watch decision and about – I think I have a post on my C4SIF.org blog called “Leveraging IP,” “Leveraging IP.  It may be on Mises.org.  But the point there was I was given the example of how Omega could not stop Costco from buying its watches in – was it Argentina?  Some South American country, which were cheaper there, and reselling them in the US, engaging in price arbitrage.

00:27:27

They couldn’t stop them from doing that legally because they weren’t doing anything wrong.  So they put a copyrightable design on the back of the watch and then accused Costco of violating copyright.  Costco said, well, there’s the first-sale doctrine, which says that once you buy something protected by copyright, you can resell it.  Costco said ah, ah, ah, you bought it outside the US, and the first-sale doctrine only sort of gets started once you have it in the US.  So they use some technicality in the law there.

00:27:55

And I also mentioned how, in the field of fashion design, a lot of designers use their trademark logos as part of the fashion design itself, part of shoes, part of purses, part of luggage, part of clothing because they have no other way to stop knockoff companies from copying their designs.  So they actually strangely embed their trademarks in the design itself, and that’s become a theme of high fashion now.

00:28:26

I’m not saying I don’t like it, but I don’t think this would have happened if not for trademark law.  If trademark law were restricted just to cases of fraud, then it would have done no good to put that logo on there because, for example, a knockoff Chanel purse, which embedded the same logo in the purse fabric, as long as the seller doesn’t defraud the buyer and the buyer knows they’re buying a knockoff, there’s no fraud, and there would be no trademark action.

00:28:5

So if trademark action were not statist and distorted as it is now, then fashion designers would have – they wouldn’t have had copyright protection like they don’t.  They wouldn’t have had patent protection, and they wouldn’t have been able – it wouldn’t have done them any good to put the trademark as part of the design.  So they wouldn’t have done that either.  I don’t think they would have done it.  I think they did it for these reasons.  So the entire fashion industry would look different now.  So that’s another way that IP can distort culture, distorted Hollywood, distorted the way movies are distributed.  It distorted fashion.

00:29:30

It distorts innovation because, for example, when you – when patent law protects some things but not others, then people are going to tend to engage in innovation in the areas where they can get protection in, practical gizmos, things that are about to be invented, not things down the road, not more long-term R&D.  So then the government has to come in with government funding of research and development.  After all, there’s not enough of it going on.  So you see, the government creates a problem and solves it by more intervention and more taxes.

00:30:03

Another way that it distorts R&D is a lot of smaller companies are unable to enter into an arena because of barriers to entry caused by the large patent holdings of bigger companies, or they see a crowded field, a field crowded with lots of patents, and they are – they’re reluctant to go into that area, so they go into another area.  So they don’t even innovate.  They don’t even try to innovate in the protected area.  That distorts the market.

00:30:34

And as I mentioned, a lot of companies do crazy things like the way that HP laser printers are designed to have chips, sort of chips and circuitry and mating devices half built into the laser printer body, half into the cartridge, so that any infringer that makes a knockoff of the cartridge like a cheaper laser ink cartridge is infringing a patent.  So they basically arrange their products just so that they can cause people to be infringing if they make a copy.  So that’s distorted the way industry and technology in the market have developed as well.  Any questions about that so far?  Is that clear?  Hello?  Am I live?  Hello?  John, you there?  Good.

00:31:38

Okay, before we get to the main part of the lecture, for those of you who are interested in Hoppe, I bring this up because there’s a lot of – I mean I think Hoppe is the greatest living libertarian theorist and probably the greatest libertarian theorist ever, greater than Rothbard because he built on Rothbard and Mises, and I think his theories are just amazing.  In fact, I intend to give a course on Hoppe’s political economy later this year.

00:32:06

So a lot of people ask, well – that are Hoppe fans that don’t like my IP idea say, well, are you – what was Hoppe’s view on IP?  And he never wrote a lot about it.  I always knew he agreed with me because he encouraged me to write on this stuff, and my stuff is based upon his property theories.  I mean it’s a natural implication of what he’s developed.  And I know he’s in favored, but he doesn’t have a lot in writing about it because he hasn’t concentrated on that, but he did have something in 1988, which I’ve pointed people to.

00:32:40

He was on a panel, David Gordon and others, and someone asked Hoppe: Does the idea of personal sovereignty extend to knowledge?  Am I sovereign over my thoughts, ideas, and theories?  And Hoppe said, “In order to have a thought, you must have property rights over your body.  That doesn’t imply that you own your thoughts.  The thoughts can be used by anybody who’s capable of understanding them.  So you can see he’s sort of with us on this, but he didn’t go very far with it.

00:33:09

But he was interviewed earlier this year just a couple months ago by the Daily Bell, and someone asked him explicitly if he agreed with my stuff, and I won’t read the quote, but – well, I’ll read part of it.  They asked him if he agreed with the anti-IP view that I have, and he said, yeah, it’s not just wrong but confused and dangerous.  Ideas, recipes, algorithms, theorems, etc. are goods unless they’re bads”—and we’ll get to this later in today’s lecture, by the way—“but they’re not scarce goods.  Once they’re thought and expressed, they’re free, exhaustible goods.

00:33:45

Imagine I’ve been granted a property right in my melody or poem such that I can prohibit you from copying it or demanding a royalty from you if you do.  Doesn’t that imply absurdly that I in turn must pay royalties to the person or his heirs who invented whistling and writing and so on and further on to those who invented sound-making and language and so on?”  And of course he’s right.  He’s taking it – he’s showing that the idea of IP is absurd and would basically lead to a stand-still of human life if it were applied stringently, consistently, and in a principled way.  I mean there’s a reason these rights expire after a finite amount of time.  I think people that advocate them realize that it would be unworkable if they let them last for too long.  It would strangle human life.  I’m on slide ten.  I’m going to switch to slide 11 now.

00:34:36

Oh, let me just go on.  Hoppe says, “Second, in preventing you from making – preventing you from or making you pay for whistling my melody or reciting my poem, I’m actually made a partial owner of you, of your physical body, your vocal chords, your paper, your pencil, etc. because you did not use anything but your own property when you copied me.

00:34:58

If you can no longer copy me, this means that I, the IP owner, have expropriated you and your real property, which shows that IP rights and real property rights are incompatible, and the promotion of IP must be seen as a most dangerous attack on the idea of real property and scarce goods.”  Anyway, I don’t want to appeal to authority, but I just want to mention that because Hoppe is an influential thinker, and he’s clearly with us on this, as are all modern Austrian libertarians that I’m aware of.

00:35:27

00:35:30

This is from the last time, and I thought I would leave it in here.  One of these students had a question about trade secrets, and in case anyone here had any questions about trade secrets because I didn’t go spend too much time on trade secrets.  So I was going to go through this if anyone wanted me to.  Karl says – Karl Fielding writes, “Without IP, secrecy would develop a more pleasant odor.”  Well, I think it would.  I think that right now, like as I mentioned before, the IP law, the patent law attempts to basically bribe inventors to reveal their secrets.

00:36:10

You give them a monopoly in exchange for them publishing or disclosing in a patent application their invention.  But as I mentioned, it doesn’t really – that doesn’t result in too many more disclosures because most people that patent their ideas would have disclosed them anyway when they sold a product.  But other people that are not going to patent their stuff—they can’t afford to or they don’t want to—they’re under the constant threat that they would be sued by someone who later independently invents the same idea and patents it.

00:36:44

So some of them engage in defensive patent publishing, and they disclose what they would otherwise have the right to keep secret in a trade secret.  So the entire field of secrecy is distorted by patent law.  I tell you what.  That’s slide 12.  Let me skip this.  If anyone has any questions about that, I’d be happy to go into it, but I’ll skip it for now because it’s not a systematic part of this lecture.

00:37:07

00:37:10

Okay, so where we left off.  Last time, we talked about the two basic arguments for IP.  Basically, people say we need it because we need – we won’t have any innovation or enough innovation without it or at least that it encourages innovation, and we get a lot of bang for our buck.  That’s sort of the less-principled view.  That’s more the tinkering policy view, the wealth maximization view.

00:37:38

The sort of principled view or the rights-based view, which a lot of libertarians gravitate towards and Randians pretend they gravitate towards, is based upon the idea that the inventor has a right.  See, the other idea says the inventor – doesn’t say the inventor has a right.  In fact, if you think about it, the Constitution, which is type two here on slide 13, wealth-maximization based, utilitarian, the Constitution is that way because it says Congress has the power to grant – to authorize, to pass a law that grants these patent and copyright monopolies.  It doesn’t say they have to.  It just gives them the authority to.

00:38:15

Congress could abolish the patent and copyright law tomorrow, and it wouldn’t bother the Constitution.  So the Constitution doesn’t see this as a right of authors or inventors.  It just sees it as a policy tool the government might want to use for its own ends to encourage disclosure, to encourage innovation and artistic creation, etc.

00:38:36

So the other argument is that inventors and creators have a right.  That is, they deserve some kind of legal protection, basically protection from competition in the sale of their creations whether it’s an original work in the case of copyright or whether it’s an inventive machine or process or something like that in the case of a patent.  So those are the two basic arguments for IP.

00:39:07

00:39:12

And I think I’ve – as I went along, I tried to explain a lot of the problems with their arguments, but what I want to develop is sort of the from-scratch libertarian perspective on this, just the right way to view this whole area.  And once you see that, it becomes easy to see what’s wrong with these other arguments and what’s wrong with IP in general.  But just to summarize, the main problem with the wealth-maximization view in addition to the fact that value is not measurable and is not interpersonally comparable and that, even if you could do that, it would be unjust to take from A and give to B just because the value of what you took from A is less than the value that it means to B.

00:40:00

In addition to those problems with it, the primary problem is that these guys say that – the advocates of IP that say they’re in favor of it because you need it and because it generates net wealth in the form of innovation, they never prove it.  They never have any arguments.  They never have any data.  They don’t even have any guesses.  So – and in fact, all the studies or the predominant bulk of the studies are either extremely skeptical or conclude – they study another area and they’ll say it looks like patents are hurting innovation here.  It looks like patents are not necessary here in this historical period.

00:40:38

I mean all the data points against having a patent or copyright system at all, so if you really were a sincere utilitarian, you would go with the data, which says let’s don’t have these laws, at least until we can prove it.  So that’s the primary problem with utilitarians.  The primary problem with the rights-based arguments is that they – number one, they don’t comprehend the role of learning and information in action and its distinction from the role of property as being scarce.  They do not distinguish between value and wealth on the one hand and between property rights on the other.  And they also have been sort of fooled by this entire labor theory of value and the labor theory of rights that’s built into Locke’s theory, so we’ll get to that in a minute.

00:41:44

00:41:52

So this is what we’re going to talk about today in the rest of the lecture, so let me just go and get right to it.  Now, let’s step back and think what it means to be a libertarian or even to be sort of a free-market economic liberal in the good sense, someone who generally believes in prosperity, who believes in cooperation, who believes in economic efficiency, civilization, societal cooperation, peace.  Why are we libertarians, those of us who are, and what does it mean to have – to be in favor of property rights, and why do we need property?

00:42:37

I mean the basic libertarian rule in my conception is sometimes we say it’s the non-aggression principle.  That’s sort of the encapsulation.  I think this is not the – this is more of a second-order or derivative consequence of our basic rule because non-aggression means you don’t commit aggression against someone else or their property, which means you don’t use their property without their permission.  Or another way to put it is you don’t invade the borders.  You don’t invade their property, or you don’t alter the physical integrity of their property without their permission.

00:43:18

But what is their property?  You see, it’s only aggression if the thing that you’re trying to use is owned by the other person.  In that case, you need their permission, and if you don’t get it, then you’re committing aggression.  But what is property?  What rights do they have, and what things do they have property rights in?  So aggression is sort of a derivative result or conclusion once you have an idea of what there are property rights in.  So then the question is what is the libertarian view of property rights.

00:43:55

And in my view, the libertarian view of property rights is simply the way we assign property rights is in accordance with the Lockian homesteading principle, which is basically finder’s keepers.  The first person to appropriate something that was – a resource that was previously unowned is its user.  Now, I’m not trying to defend that view here, although there’s hints of that in a minute, but I’m just trying to lay it out.

00:44:25

This is what the libertarian view is.  So the libertarian view is a set of rules that help us identify who owners are.  And then once you know who the owner is, then aggression is just invasion of the property rights of those owners.  So aggression is not primary.  I would say aggression is secondary.  Property rights are primary.

00:44:48

So why do we need property?  Now, Hoppe starts out in his writing.  I think it’s chapter two – chapters one and two of his Theory of Socialism and Capitalism, which I highly, highly recommend with sort of a thought experiment, which is similar to what Rothbard does in the – in economics in the evenly rotating economy.  I don’t know if some of you – some of you may have heard of this, but Rothbard uses the mental sort of construct of the evenly rotating economy, not something we could ever accomplish in the real world.

00:45:24

The real world is dynamic and always changing, but it’s sort of a way to isolate certain features of the way economics works to understand certain features of economics in general.  So just like Rothbard has this ERE, or evenly rotating economy idea, even though it’s unrealistic, Mises has that too, or Mises has something similar.  I’m trying to remember what it is.  Does anyone remember what Mises calls the evenly rotating economy or what his version is?  Maybe it’s the same.  I’m thinking it’s Rothbard’s though.  Anyway, maybe John knows.  Maybe they both called it that.  Maybe so.

00:46:01

In any case – okay, so it’s Mises.  Thanks.  So Hoppe talks about – and also Robbins – or, I’m sorry, another similarity is in economics and in Rothbard’s social theory, there’s something called Crusoe economics.  So they also envision – now, this is not unrealistic.  It’s just not exactly common today, but they imagine Crusoe on a desert island, and then they imagine how economics would work there and also how social relations would work or how rights would work, whether they make any sense.

00:46:42

And then one day Friday comes onto the scene.  There’s two people there.  Can they cooperate?  Can there be a division of labor?  There could be trade.  There can be – and then socially there can be violence or cooperation, etc.  So they also introduced the Crusoe economic state.

00:46:58

So Hoppe talks about the Garden of Eden.  There is actually another word for this in German, which he uses in his recent paper in my journal Libertarian Papers.  I’m trying to remember.  It’s some German word, which is kind of cool.  Anyway, it means the Garden of Eden, a place of land and plenty or something like that.  So if you imagine this hypothetical construct of a Garden of Eden where – now, we’re assuming we still have human bodies, but basically there’s no scarcity at all if you can imagine that.  There’s no conflict.

00:47:31

If there’s no scarcity, there would be no conflict.  There could be conflict over bodies, so you would still need property rules to decide who gets to use this body, but let’s forget about that for a second.  Let’s just assume a world of scarcity.  You would have no need for rationing, no need for production.  Property rights would be completely meaningless and unnecessary.  So let’s just take an example that we have a world where there are either so many banana trees everywhere.  They’re super abundant.  They’re just everywhere.

00:48:07

You can just reach up your hand no matter where you are, and you can grab a nice banana, and let’s say they’re all the same.  They’re all healthy.  They’re all delicious.  They’re all great.  In this kind of world – now, remember, let me mention one thing.  As economists, we use the word scarcity in a technical way, and what we mean is basically rivalrous.  So scarcity means the property of a given thing such that conflict over it is possible.  This is very important.

00:48:38

I know Mises used the Land of Cockaigne, Danny.  But Hoppe has this German term like – maybe someone can look it up.  It’s one of the last one or two articles published in this year’s volume of Libertarian Papers and he’s got this term.  In any case, it’s not important.  So in this – so scarcity is sometimes used in two ways, and you have to be careful which way you’re meaning it because you’ll be – sometimes IP advocates will equivocate, which means they’ll use a word in two different senses to make a false argument.

00:49:16

So they will use the word scarcity in the common way to mean like rare or not very abundant.  So they’ll say something like, well, good ideas aren’t very scarce.  I mean good ideas are pretty scarce, but they don’t mean that they’re scarce in the sense that we mean.  What they mean is they’re not easy to come by.  There’s not many of them.

00:49:40

By the way, Karl says free goods aren’t objects of action, but scarce goods are.  I’m going to get to that at the end of the course – or the lecture today with a kind of break down.  But I would say that – well, that’s the sort of Misesian/Rothbardian – right, that’s the Misesian/Rothbardian/Hoppian idea of a background condition.  That’s correct.  It is not a means of action.  It’s not a means of action.  It’s a background condition.

00:50:08

Okay, now, whether you want to consider ideas and knowledge to be a background condition or a free good I think is just terminological, but like you say here, Mises calls free goods conditions of existence.  So in a way they’re the same thing.  But let’s get back to our banana example.  So let’s say we have a world – a physical world but a world where there’s just a superabundance of bananas.

00:50:37

Now, in this world, if I picked a banana and I held it in my hands, we could say that’s a scarce banana because it is a rivalrous banana.  Conflict over it could be possible.  If someone tried to grab that banana, only one of us could have that banana, and we would fight over it, and violence would be the result.  But, and here we get to the problem with these unrealistic examples.  Realistically in such a world, would I really even regard the banana as owned?  I mean would I even care if I was just possessing it or owning it?

00:51:16

I don’t think I would care if I owned it, which means having a right to have it because if someone took it from me, I would just grab another banana, and that would be fine.  I wouldn’t care.  And by the same token, no one would take it from me in the first place because they don’t need to.  They can just grab their own bananas from up in the air.  So you could see that sort of like if you think about the mathematical concept of the limit, which is used in the calculus, the conventional or the colloquial idea of scarcity as being lack of abundance converges with the economic concept of scarcity because, at the limit when there’s just superabundance, then we would say there’s no conventional scarcity of bananas…

00:52:04

And we also might say there’s no real scarcity either because no one – we have to regard these things as scarce goods.  So these things converge in this way.  Actually now – I was going to play this video later, but now might be a good time to play it.  I’m going to play the Nina Paley video because it plays into something I’m going to bring up next, so give me a second.  I’m going to play this from my desktop, and I hope that the sound is okay, so give me just a second.  Okay.

00:52:41

00:53:44

Okay, I’m back now.  How did that work?  Did it work okay?  I couldn’t see.  Could everyone see and hear that?  I could do it in the video window.  Let me try the first half in the video window here and see how this works for everybody.  Give me a second.  Okay, here we go.

00:54:16

00:54:55

Okay, I’ll stop it here.  Give me a second.  Let me turn this thing off.  Okay, now the reason I wanted to show that – is everyone back?  Let’s see.  Hold on a second.  I messed up.  Give me a second.  I’ll get it straight.  Okay, all right, now – am I back now?  It’s only a minute.  I don’t know if everyone could see the full thing.  I can’t in mine, but anyway it’s only a minute.  It’s called a minute meme.  It’s on QuestionCopyright.org.  It’s one of several videos by Nina Paley who’s a friend of mine, and she’s great.

00:55:53

She’s an artist, but the part I like in that is where they show the bicycle, like you just kind of touch someone’s bicycle and you pull your hand out and you create another one.  Now, that’s obviously not our world.  But in such a world, I mean basically we’re like mini gods.  We can all just conjure up what we want any minute.  In such a world, you wouldn’t need rationing.  So the point is, the purpose of property is for people who want peace and they want cooperation and they don’t want violence, which is what you have to have when people fight over these rivalrous things.  That’s what rivalry means.  You have rivals fighting over them.

00:56:33

If you want people to be able to use resources as means of action productively for long-term projects, to make crops and to use their house in confidence to have a long-term time horizon, to have low time preference, to have civilized society, then you’re going to want to allocate the right to use these things to individual people.  That way people can see who owns it, and they can avoid trespassing or using it, and everyone can use their own things peacefully and productively.  So this is the idea, the libertarian idea is to assign these property rights to people.  But now, every system assigns property rights to individual owners, even Soviet Russia, even China.

00:57:22

Someone has control over every resource.  The legal system designates an owner in every case, so what makes libertarianism different?  It’s our particular property assignment rule, which I hinted at already.  It’s the Lockian idea.  It’s the idea that basically the person who’s the owner is the person who is the first one – well, in the case of our bodies, it’s each individual person.

00:57:48

In the case of external objects, of scarce resources in the world, it’s the person who first acquired and used that property.  The reason is this person has a better claim than anyone else because everyone else that comes after is called a late-comer, and if you’re going to let a late-comer take property from a guy who had it earlier, then who’s going to – what rule can you come up with that keeps a second late-comer from taking it from him?

00:58:16

In other words, if you allow late-comers to take property from someone who had a prior claim to the property, then you don’t have property at all.  All you have is possession, which is basically a world where there’s no property rights.  It’s a world of might makes right, which is back to the original situation where we have conflict over resources.

00:58:39

Okay, so this – the libertarian position is really the only one that makes any sense.  As Hoppe writes, and some of this makes sense now that I mention this – sorry.  My alarm clock is going off.  I mean my cuckoo clock.  Anyway, Hoppe writes, “only because scarcity exists is there even a problem of formulating moral laws; insofar as goods are superabundant.”  By the way, I’m going to take a break after this, so everybody relax.

00:59:13

00:59:19

“Insofar as goods are superabundant (or free goods) no conflict over the use of goods is possible and no action-coordination is needed.  Thus it follows that any ethic—now, by ethic he means an interpersonal ethic, a political ethic—if correctly conceived, must be formulated as a theory of property, in other words, a theory of the assignment of rights of exclusive control over scarce means.  Because only then does it become possible to avoid otherwise inescapable and unresolvable conflict.”

00:59:50

Why don’t we take a five-minute break?  It’s 9:01 my time, so why don’t we come back at 6 past the hour?  And we will resume.

00:59:59

[break]

01:00:32

Sorry.  I took two minutes extra, didn’t realize that.  Okay, I would like to mention something here.  A lot of the modern opponents of – sorry, proponents of IP will say that scarcity is not important for property rights, and like I said they’ll do this equivocation thing where they’ll say good ideas are pretty scarce, something like that.  I think Neil Schulman who’s an IP advocate, neo-objectivist – excuse me – IP advocate, he had a comment the other day.

01:01:12

If my novel – something like if good novels aren’t scarce, why don’t you try to write your own, or something like that.  And I told him; I said, well, why don’t you substitute the word rivalrous and see if that makes any sense.  If good novels aren’t rivalrous, why don’t you write your own, and you can see it makes no sense whatsoever.  But this has been – this idea has been around for a long time.  I mean David Hume back in 1751, he emphasized the importance of scarcity for the – what the definition of what property is.

01:01:44

So did Benjamin Tucker in the 1890s, the economist Arnold Plant, 1934.  I have links here on slide 17 to blog posts I did discussing all these things.  Rothbard talks about it too, and of course so does Hoppe, which I just mentioned.  And now, Jeff Tucker and I have an article we wrote six months ago or so trying to figure all this out and trying to diagram.

01:02:14

I mean we went through Menger and Mises and Rothbard and Hoppe and some other Austrians and some other thinkers.  And they’re usually just a little bit different, and no one thought about some things a lot, so they didn’t take the time to carefully classify these non-scarce goods too closely.  You find hints of – you can find hints of insights in what they wrote, but we kind of had to just start from – try to redo it basically.

01:02:45

So let’s see where we are on this lecture here.  Anyway, the point is, as I mentioned earlier, that we do have scarcity.  This is the real world, and the implication is that we’re going to have conflict, and we’re going to have conflict unless we have property rights over these things, things that have exclusive use in that only one person can use it at a time.  We say exclusive because if I’m using it, it excludes your use and vice versa.  That’s what rivalrousness means basically.

01:03:19

Now, something that we should consider here—I’m on slide 18 now—this has a lot of implications for economics and the understanding of human action and interaction.  Now, I’m going to talk about what Mises called praxeology.  Some of you may be very familiar with this.  Some of you may know it a little bit.  Some may not.  For those who don’t, don’t be put off by the word praxeology.  I was for a long time.  It took me a long time to kind of start grokking Mises.  He’s got a strange terminology in some ways.

01:03:54

Praxeology is just – praxis means action or something like that, and –logy means, of course, logic or study of something.  So he just meant the study of human action or the science of human action.  And the reason he meant that was because he had a dualist view of science.  And I agree with it and so does Hoppe, and Rothbard in his own sense does too, in his own fashion.  Rothbard was more of an Aristotelian but still – and sorry – Mises was more of a Kantian and so was Hoppe but not in the subjectivist way or the idealist way that the objectivists rightly criticize.  They’re both realist.  Mises is a realist.  I’m a realist.  Hoppe is a realist.  Rothbard certainly was a realist.

01:04:41

Kantianism in this more European realist sense is not idealist and subjectivist in the sense that the Randians criticize.  I can give more information on this if anyone wants it, but that’s a fascinating topic, but it’s a little bit off topic.  But my point is Mises has a certain view of two realms of knowledge, and by the way, I would highly recommend that if you haven’t read a lot of Mises, do not start with Human Action but read his – I don’t know if it’s his last book, but it’s one of his last books.  I believe he wrote it when he was in his 90s.

01:05:18

01:05:23

Well, okay, Karl is interested, so let me just say here.  I’ll try to post something later with some links.  But what I would recommend, and this is in line with that, start with Mises’ book called The Ultimate Foundation of Economic Science.  It’s a short book.  It’s about epistemology and methodology, and it is just fantastic.  In a way, it’s sort of a reprise of his earlier book, Epistemological Problems of Economics, but it’s shorter, and it’s just fantastic.  It’s a – and I will send a link out, but the other ones I would recommend would be Hoppe’s short pamphlet.  It’s on his site, HansHoppe.com.  It’s called “Austrian Science in the – Economic Science and the Austrian Method.”  And also he’s got a chapter in the book, Theory of Socialism and Capitalism.  I think it’s chapter six criticizing positivism, logical positivism.

01:06:18

Oh cool, Danny.  Danny, is it by Mises?  Who is the article by?  The Mises Daily coming out tomorrow on Mises epistemology.  Anyway, I’ll wait for his answer on there.  Anyway, but let me just summarize.  What he does is he says, look, if you want to understand causal phenomena, that is, cause and effect and how we select the means that are going to be efficacious to achieve what we want to achieve, then you have the sort of natural sciences, empirical sciences.

01:06:56

We try to figure out laws of cause and effect, but if you want to understand what humans are doing, we’re motivated by – we have free – we’re understood to have free will or free choice, and we have goals that we pursue.  So when you try to understand your friends or other people that you observe, you think of them as being like you in that you’re both human actors.  You make choices, and you assume this guy is a certain character and he’s got a certain framework of action that he’s engaged in.

01:07:24

He’s trying to do something that will achieve some goal, and then you try to figure out what those goals are from empirical facts and from understanding from experience and from understanding other humans.  But the point is economics is about this second category.  It’s about teleology.  It’s about understanding the implications of human action.  And praxeology just means we think about the bare fact that we know that there are human actors out there, that is, intelligent, goal-seeking, choosing beings and that they act.  And just knowing this thing we can learn a lot about the structure of human action.  So, for example, at the bottom of 18, I’ve got some of these categories.

01:08:08

Now, that’s a Kantian idea, the categories.  It’s sort of the breakdown of undeniable truths or concepts, and by the way, this is not incompatible in my view with Aristotelian or Randian ideas.  They also had similar proofs, proving by contradiction, showing that denying something leads to a contradiction like the law of identity, the law of causality itself, the law of non-contradiction, the fact that there is existence, the fact that there’s consciousness.

01:08:43

I mean you have to be conscious to deny it, which is the essence of Descartes’ cogito, ergo sum: I think.  Therefore, I am, which doesn’t mean that you exist because you think.  It means that because you know that you think, you know that you must exist because only an existing being can think.   In any case, this is just a type of proof that these things are, so we know that they’re a subjective value.  That means the subject, the person himself, is the one that values.  We know that he makes choices.  This is implied in the idea that we act.

01:09:15

Karl says Kant thought categories were organic characteristics of the human mind.  I mean that is one interpretation.  My understanding is that that is the American idealist interpretation of Kant, but there is a more realist interpretation of Kant on the European continent.  But I will say that Kant was probably so murky that he leant himself to different interpretations.  But in any case, I and others are only in favor of a realist interpretation of this approach.  I think Mises was also a realist.

01:09:50

In any case, it also implies demonstrated preference, which means that we demonstrate what we value when we act, which also implies opportunity costs because whatever I’m trying to achieve, I’m demonstrating by acting to achieve it that I value that higher than any other thing I could have chosen to pursue.  And those other things are the second and third most highly ranked things, which are the opportunity costs of my action.  That’s the cost of my action, the thing I couldn’t pursue when I was pursuing this thing.

01:10:29

It also presupposes causality because if you didn’t believe there was a regular sort of concatenation of events, some kind of connection between your choice and use of a given physical means and your action to try to achieve some result, you wouldn’t even engage in action.  You have to believe there’s some kind of causality that would connect your action to the result you’re trying to achieve.  It also distinguishes means and ends.  The mean is what you use to achieve your end, and also the concept of profit and loss.

01:11:01

A profit would be not necessarily a monetary profit but a psychic profit.  That is you – the idea is that Mises says humans have felt uneasiness, and we act to try to alleviate or reduce that uneasiness.  And the uneasiness is always future-oriented, like I envision a future state of affairs, even if it’s a second from now, that will occur if I don’t act and that I don’t want to happen.  I would prefer some other state of affairs, so I intervene in the course of affairs to change what’s going to come in the future because I think I would prefer that.

01:11:38

Now, when you get there and let’s say you succeed in achieving what you had planned at achieving, but then you’re not satisfied, well, you could say there’s a loss.  You misunderstood what you really wanted, or let’s say the means you chose was not successful in helping you achieve what you were trying to achieve.  Again, you would have a loss.  So that’s where profit and loss come from, so all these categories are implied in the very concept of human action.

01:12:06

01:12:10

This is chapter 19 now.  Now, this is something I think is important to recognize.  We only have about ten minutes left.  Let me just finish talking about this.  I would have room for questions.  I don’t know if there will be a lot of questions because there’s just 12 of you online right now.  If there’s any questions, I’d be happy to stay late, but I think it’s late for a lot of people, so I’d like to stop close to on time.

01:12:34

I’ll go to – I’ll go ten minutes past if I need to or even further but not too much longer.  So if there’s questions, let’s save those for even next time or for the written course question page on the site over the next week.  So this is really important to recognize.  Given this understanding of human action that I’ve just laid out, there is a difference in scarce resources and knowledge, and I’m using knowledge in a general sense to refer to information, ideas, beliefs, recipes, techniques, what have you.

01:13:14

Now, some IP advocates will say that IP doesn’t protect ideas.  It only protects the expression of ideas or certain types of ideas.  I think that’s quibbling and it’s just petty fogging and irrelevant.  I mean IP does protect some types of ideas, not all of them, but it does protect some, and the question is should it.  Are there property rights in any ideas or any information or any type of information or knowledge?

01:13:37

Okay, so the function of the market and the function of action relates around the structure of human action.  So, as we mentioned, every action involves some means that you employ to achieve your goal.  But what’s the role of knowledge?  Knowledge stays in your mind or in your brain you could say, but knowledge is just information you have about the way the world works.  Typically it’s causal-related information, or it’s empirical data.

01:14:11

So the information might be knowing what means will achieve a given end, what possible means there are.  It might be knowledge of the cost of these means.  It might be knowledge of your own preferences, what kind of thing you prefer.  It might be knowledge of the possible ends that you could aim at.  It might be knowledge of the ends you’re giving up.  So knowledge plays a role when you make your decision.  Knowledge is a guide to action.  This is what Mises says and what other Austrians say.  They don’t emphasize it a lot because they sort of take it for granted, but I think it’s extremely crucial.

01:14:49

So let’s take an example.  Let’s say you would like to bake – let’s say you’re hungry, so you have a felt uneasiness.  You know that you’re hungry.  You’re going to get hungrier, and you’d like to do something to alleviate that hunger in the next hour or so.  So you might consult the knowledge you have, and you have knowledge of what resources you have on hand.  You have knowledge of your preferences of what abilities you have to do something about it, what other pressing needs you have for your time in the next hour two.  And you may say, well, listen.  I think I’d like a cake, and I can make a chocolate cake or I can make a lemon cake, and I know how to make both.

01:15:33

I have the recipe ingredients for both.  So you choose to do one of those.  Now, you use your information in your head, in your mind, your knowledge of how to make the cake to do it, to guide your arm, to guide your selection of resources.  But you use a mixing bowl and a spoon and an egg and the batter and an oven to bake the cake.  Now, you and your neighbor can do the exact same thing at the same time.  You can both be baking a chocolate cake using the same recipe.  You don’t need ownership of that recipe to use it.  You just need to have it, but a million people could have it and they could be using it at once.

01:16:17

But only you can use your bowl.  Only you can use your eggs.  That’s why these scarce things need to be owned for there to be successful, conflict-free, productive, cooperative action.  But ideas do not be.  And this is basically the reason why there’s confusion among the IP advocates about property rights and ideas.  They don’t stop to think about the role of information and knowledge and the role of means of action in action.

01:16:49

01:16:54

Let’s go to slide 20.  And another way to look at it is to step back and think that the way the universe is, the way our universe is, the way our world is, is we are faced with a world of scarcity.  This is the reality we face.  We are physical, mortal beings.  We’re fallible.  We’re frail.  We’re fragile.  The environment is hostile and dangerous.  It doesn’t maybe seem so now because we’ve come so far, but the world is a difficult place to survive in.

01:17:27

We have to constantly acquire food, protection, and fight against erosion and the weather and the animals and pestilence and sickness and scarcity and drought, and the world is a dangerous place.  But these two ingredients to successful action is the secure property rights and ownership of scarce resources and knowledge.  Now, over time, the body of human knowledge can grow and has grown, and every time someone discovers something, it can be added to the body of human knowledge.

01:18:08

Sometimes it’s lost, but over time, the more valuable bits get replicated and improved on and taught.  This is what learning is about.  This is what education is about.  This is why people teach each other.  This is what language is for in part, right?  This is why parents teach their kids and mentors teach their – what do you call the opposite of a mentor?  The protégés.  You take a job, you learn something from the job, and then you move on.  You go to a higher job, and this is what emulation is about on the market.

01:18:42

This is what competition is.  When one person is making a product that serves a consumer, other people see that he’s successful, and they might emulate him.  They might start making the same type of horseshoes he’s making, or maybe they’ll improve on his horseshoes.  In this way, the consumer is always benefited.  There’s always a ceaseless striving for improving processes, satisfying the customer, etc.

01:19:09

Competition and emulation in learning and the transmission of knowledge and the general use of the general body of human knowledge are actually good things.  They’re not bad things.  And one way to see this is to consider what the function of the market is with respect to scarce resources.  So the market is sort of the interaction of humans dealing with scarcity of things.  But the market with the division of labor in an advanced economy where there’s money, where there’s capitalism, where there’s industry, or where there’s division and specialization of labor, where there’s a lot of people, life spans increase.  Abundance is increased.  Scarcity is fought back.

01:20:00

The entire purpose of the market is to fight scarcity, to overcome scarcity, to make more things even though it’s difficult, to give us plenty and abundance in these scarce means, which are otherwise rare and scarce and non-abundant and rivalrous.  And yet we already have this for knowledge.  Knowledge is already non-scarce.  So the market is trying to overcome the problem of scarcity in the realm of scarce things.  And luckily knowledge, which is the second key ingredient to human action, is already non-scarce.

01:20:40

And IP law comes in and seeks to impose scarcity rules on knowledge and to make it artificially scarce.  The advocates of IP explicitly admit this.  They will say.  I’ve quoted some of them.  They say that we’re trying to reduce competition.  They say that we’re trying to slow down the spread of knowledge.  I mean they don’t deny this.  Well, to my mind, this is suicidal and insane and completely unjustified, and I think I sort of explained why by now.

01:21:14

Okay, we’re on the last slide; 21 is the last slide, and we’ll go on to the next lecture next time, so let me just talk about it here.  This is sort of a breakdown derived from the article I did with Jeff Tucker, and it’s just sort of a way of looking – by the way, this cartoon is also Nina Paley’s.  This is her Mimi & Eunice.  You can see – I don’t know which one is Mimi.  Let’s say Mimi says, “If I steal your copy, you don’t have it anymore.”

01:21:41

So she takes a CD.  And then Eunice sees that they both have a copy of the same one.  “If I make a new copy, we both have one.”  So she’s distinguishing between theft and between copying.  And then Eunice says, “If you compete with my monopoly, I don’t have it anymore.”  So it’s just showing the violence, the naked violence that the state helps copyright holders use.  Anyway, let me just go through this diagram.  Then we can be done for the night, although I’d be happy to take questions.

01:22:07

Now that we’ve finished on time I don’t mind taking questions, so anyone who wants to leave can leave when I’m done with this slide.  So it’s just a four-quadrant sort of chart, breaking goods down into either good or non-good and scarce or non-scarce – or, not goods, breaking things down into this.  So a scarce good would be something like a bagel, a factory, a desk, something that’s useful and that’s scarce, a scarce resource, that is, a rivalrous, conflictable resource.

01:22:41

Now, a non-scarce good, which you could also call a free good or the general conditions of action, would be something useful that plays a role in successful human action but that is not a scarce resource.  This could include recipes, ideas, information, images, tunes, skills, which are like abilities, and fire.  Even fire can spread.  Thomas Jefferson famously said that IP was unjustified as a natural right because it’s like a fire, and just as you can light your candle or taper, he called it, from someone else, you both have a fire now.  No one is diminished by this, and everyone is lit by this.  It’s a good thing.

01:23:21

Now, you could also think of some things as being non-goods.  To be honest, it’s really not that relevant for our purposes.  Maybe this is not the right categorization, but we were just trying to think of examples, and a non-good would be like a mud pie or poison soup, something you just don’t want.  It’s scarce, but no one wants it.  It’s not useful.  It has no value.  No one values it.

01:23:44

And a non-good that’s a non-scarce non-good, I don’t know if such a thing really exists, but maybe a terrible sound or a bad idea.  I mean a bad idea is not scarce, but it’s really a good because it doesn’t play a useful role in human action, although some people might think it does at the time by subjective preference.  So I don’t know if this category is completely rigorous, but the first two are.  The two good categories are: scarce and non-scarce goods.  So property rights and scarce goods – there should be no property rights in non-scarce goods.

01:24:16

And one more point, the basic reason for that is that assigning property rights in these non-scarce goods, remember property rights in the law are always enforced with physical force by physical people by real courts in the real world against a real scarce-resource property of the victim of this law.  So there’s really no such thing as property in non-scarce goods.  It’s just a pretense or a disguised form of assigning rights to existing material goods.

01:24:50

So, for example, if you sue me for copying your technique, your patented technique, and you win, the court takes some of my money and gives it to you.  So it was all just a ruse for you to get some of my money, but I owned my money, and I did nothing – I committed no tort.  I engaged in no contract with you.  You didn’t homestead it.  There’s no libertarian legal justification for you to take this property.  The pretense is this IP idea.

01:25:25

So I’ll stop here.  I might tie up some loose ends next time and then go on to an IP-free world.  And I’m happy to take questions now, or we can stop here if everyone is tired.  I’m perfectly malleable.  I’m sorry, Gwen.  Maybe you should get some sleep.  Thank you.  No questions.  John?  Thanks Karl, enjoyed it too.  Good night, Kevin, ‘night, Brett.

01:26:28

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