Kinsella on Liberty Podcast, Episode 341.
This was a webinar I did for an Argentinian audience for ESEADE May 26, 2021. The topic was formally “Should We Release Patents on Vaccines” (“¿Hay que liberar las patentes sobre las vacunas?“). In this talk, I briefly provide an overview of the nature of property rights and the principled case against IP, then apply it to vaccines, and took questions from the audience.
Should We Release Patents on Vaccines? An Overview of Libertarian Property Rights and the Case Against IP
May 26, 2021
KOL341| ESEADE Lecture: Should We Release Patents on Vaccines? An Overview of Libertarian Property Rights and the Case Against IP
JUAN IGNACIO IBAÑEZ: So thank you very much, Iván. I’m just going to proceed in English like the rest of this little talk. So thank you to you and to ESEADE for providing this space. Thank you, Stephan, for participating, and I’m just going to start off with the introduction of our star guest speaker, which is Stephan Kinsella. So Stephan Kinsella is one of the most prominent libertarian thinkers, specializing in the field of intellectual property.
Not only is he a writer and a speaker but also a practicing patent attorney and the director of the Center for the Study of Innovative Freedom. He was founding and executive director of Libertarian Papers, which is one of the journals that has contributed the most to libertarian thought in the past years. He is also the author of a milestone book, Against Intellectual Property, published in 2008 by the Ludwig von Mises Institute. And it’s no overstatement to say that when it comes to debating intellectual property, his work is a must-read. So I’m going to kick start this meeting by – I’ll provide some context first and a trigger question for you, Stephan, and then just give you all the time you need to speak.
Maybe I’ll pitch in if I need to ask a question, but I will make a sort of Q&A at the end. So just to lay out the ground here, the title of this talk is Should Vaccine Patents Be Released? And what we’re getting at, what it boils down to, is are vaccine patents legitimate? Are they just? Should they exist? You have read a lot on the subject. You’re clearly against intellectual property. This is why we want you to explain your position because it seems, for many people, that as Iván said in Spanish, many people who uphold property rights find it intuitive to also uphold intellectual property rights.
So the question would be as follows. If I create something, I come up with something that didn’t exist before, and this is the fruit of my mind and a sign that I came up with, why don’t I get to keep it? After all, I own my mind. I own my body, and don’t I have a right to keep the fruit of my labor, which I generated, the product which I generated with my mind and my body? So isn’t this only just? And aren’t vaccine manufacturing or vaccine-developing companies have patent-holding rights? Aren’t they just exerting this very same right that I have just described? Why is any of this illegitimate? I’ll just give you the floor now. We cannot hear you right now.
STEPHAN KINSELLA: There we go. Sorry. How about now?
JUAN IGNACIO IBAÑEZ: Perfect.
STEPHAN KINSELLA: Thank you, Iván and Juan Ignacio, for the invitation and for allowing me to speak to everyone in English because my Spanish is very poor for which I have little excuse because I live in Houston, Texas, and I probably should learn it. But thank you for the opportunity. I think this came about because there were some Twitter comments in Spanish, which I was replying to. And I just offered to speak about it because sometimes that is the easiest way. I do have a tendency to speak fast sometimes, even though I am from a slow-speaking state—Louisiana—originally. But Juan you were speaking pretty fast, so I assume I can go at a fairly normal speed. If I need to slow down or anyone has questions feel free to let me know.
The question about vaccines, you cannot just answer it in a vacuum. We have to start from general principles from the beginning and work our way there. And the arguments and the explanation differs if you’re talking to – depending upon whether you’re speaking to a libertarian audience or a general audience. I believe, and I will try to explain in the summary quickly. I’ll try to speak about 30 minutes and then allow any questions.
But I think that the libertarian framework is incompatible with patent and copyrights. And I’ll speak mostly about patents here because that is what vaccine patents concern. But if I’m speaking to a general audience, first I have to explain libertarianism, and then I have to explain why intellectual property law is not compatible with libertarian principles. But I’m going to assume here that most of you are mostly libertarian, but I will try to define it in my unique way because I think that the reason we make mistakes and we make the mistake of thinking that patents are legitimate is because we don’t have a very clear understanding of our basic libertarian principles.
So it’s important to get those things very clear, and then it will be obvious why patents are unjust and should be abolished. So the ultimate answer is that the patent system is a legislative creation of the state, and it violates property rights, and that is why patent law should be abolished. And that is why patents on vaccines are illegitimate and should be withdrawn by the state if the state can do that because it just removing an unjust monopoly privilege that the state has granted.
Now, how do I come to this conclusion? So when we talk about libertarianism, we use lots of terms like freedom and liberty. We also talk about the non-aggression principle, or some say the non-aggression axiom, which I think is a misnomer because axiom means an arbitrary starting point in math. But I think the way it’s used by Ayn Rand and others is she means axiom to mean a self-evidently true principle or starting point. So we have to identify these axioms or principles, which are at the root of libertarianism. In a sense, libertarianism is not actually about liberty. If you follow the libertarian principles, you achieve a society where one of the consequences is that every human being has liberty. But the principles of libertarianism are really property rights principles.
Now, why is this? It helps to be a little familiar with the basic economic logic of Mises, the Austrian economist, to understand this. And he has – his theory is called praxeology, which is the logic of human action. It just means we analyze what people do when they act, and we analyze the implications, the logical implications of action. That is what economics is. This is not going to be too technical or complicated. It’s very common sense to envision everything that we people do, we human actors, we persons.
What we do in all of our lives is we act, which means that we live in this world. We have some awareness of what’s going on. We have an awareness that we live in the present, that we came from the past. We have a history, and we know we’re moving into the future. And we all have some idea of the way the world exists right now in the present. We have some knowledge of the way things are. And we have some idea or estimate about what the future holds. And something about the future that’s coming in our mind makes us uneasy in Mises’ words. We’re dissatisfied. We think that something is going to come that we don’t like. So we try to divert the flow of events by interfering in the world to change things.
In effect, each one of us is like a little god because we try to act to create a different universe in the future that would otherwise exist. This is what successful action is, is when you change things and you achieve some result that you wanted. The achievement of this result is not always the achievement of an ownable good. Sometimes it’s just a changed state of affairs. Like if you want to make a child smile, you might say – read the child a story and you get a smile, or you make your wife happy. Or if you want a delicious meal or if you want to see the sunset, you have to take steps to make these things happen.
But a good example would be hunger. We feel hunger in our stomach, and we realize that this hunger will get worse, and that in the future very soon, we will be very miserable or maybe even dead if we don’t get food. So we realize that future is coming, and we want to change it. So we understand some things about the world, and we seek to use scarce resources in the world as extensions of our body to interfere in a cause-and-effect way with the universe. This is a complicated way of just saying that when we act, we use tools to achieve things.
Now, you notice that there are two critical ingredients of any successful action. Number one, you have to have a body that can do things. You can control that body and control things in the universe. And you have to have the availability of resources in the world, things that you can manipulate and change. These are scarce means or scarce resources. That’s the first thing. You have to have the availability of resources that you can use or possess. You also have to have knowledge because we’re conscious actors, and we have to have some awareness of the way the world is and the world that’s coming.
And we have to have some awareness of the laws of cause and effect, that is, the scientific laws of the world, so that we know what we can do to achieve our desired result. So if I know that I’m hungry and I’m aware that eating a fish will stop that hunger, I want to catch a fish. And if I’m aware that one way to get a fish is to grab a net and catch the fish in a stream with a net, then I make a net with some available resources, and I use my body and the net to catch a fish and eat it. So you see that that’s a successful action, which we call profit in Austrian economics.
So profit refers to any successful action, and in the monetary sense, it’s monetary profit. But profit really is a general, subjective state where you – just to have a successful action as opposed to a loss or a failed action, an action that did not succeed. So any successful action needs the human actor to have the availability of resources at his command and knowledge that guides his action. So those two ingredients are essential to action. Now, if you’re alone on a desert island like Robinson Crusoe, there’s no such thing as ownership, that is, property rights because a property right is more than just possession or the capacity to control a resource.
It is the legally recognized right in society that other people respect your ability to control this resource. When we enter into society, we have other people around us, and there is – there are good things and bad things about that. The good thing is that we can live among other humans, and because we are social creatures we want that, and we benefit from that. We benefit from the company of other people, from human society, and we benefit from trade and the division of labor.
But the danger is that other people might take our resources that we are using, so they become a threat to these resources that we need to use to have successful action. So to avoid conflict over these resources, we develop societally wide and respected property rights that assign ownership to these resources to one person, so everyone else can respect that, and then they can trade peacefully and they can cooperate.
Now you notice that that doesn’t apply to the knowledge aspect of action. Any number of people can use the same knowledge to guide their action, the same recipes or technology or ideas. For example, if I learn that lighting a fire can help me cook food, then I can light a fire with my own wood or my own fuel source and cook my own food over that fire. And as long as someone doesn’t take my wood or infringe my space or take my food, I can eat that food. And someone else who learned the technique from me can also cook their own food with their own fire with their own wood.
So the information and the knowledge that we use is infinitely usable and, in fact, this is the reason why humanity gets richer and richer with every generation because this ball of scarce resources, the planet Earth that we live on, is finite. And we’re not getting more resources all the time, but we’re getting more knowledge all the time. So every generation we have more and more knowledge that we can draw upon to do things, so it makes our actions more productive and more efficient. So the spread of knowledge and ideas is good and essential. It just means learning. And property rights assign owners to the scarce resources, the things that otherwise we could have potential conflict and physical fighting over.
Now, what rules are they? This is what distinguishes libertarianism from other political philosophies. Every – the distinction of libertarianism is not that we believe in private property rights. Everyone believes in property rights because every legal system and every political system has some answer to the question who owns this resource. But the answer is not always the private law natural answer that libertarians give. The libertarians alone give the unique Lockian answer, which is this: For human bodies, which is the most important scarce resource for human beings because you can’t exist without having a body, and you can’t live without protecting the right to that body, the owner of the body is the person himself.
So the first – some people call this self-ownership, but it is more precise to call it body ownership because it is your body that is the resource that you want control of. So the first property rule is that each actor owns his own body. The second rule is, with respect to other things in the world that we need to use, these tools that were sitting around unowned in the state of nature that we need to use to exist and survive in the world to achieve successful actions, the owner of that resource is the first person who used it or whoever he sold it to by contract.
So you only have two rules for these external resources: the first user and the person who got it by contract. These are the only rules. You’ll notice that creation is not one of these rules. Creation does – we cannot create things out of nothing. All we do is we find a piece of matter in the world that is unowned. We start using it, and we rearrange it with our effort and our labor and our creativity and our intellect to make it into a more useful configuration. We rearrange it. So I take some fiber from a plant, and I make string out of it, and I take some wood, and I make a frame, and then I craft a net. I haven’t created property, or I haven’t created an item. I have reformed existing things that I already owned into a more useful thing.
This does increase the amount of wealth in the world because this is more useful to me now, and I may be able to sell this net to someone for a profit. So creation is a source of wealth, but it is not a source of property rights. And I’ll give a simple example. Suppose you’re an employee working for an automobile company in factory making automobiles or cars, and the material is supplied the employer, the owner, of the factory, the metal, the rubber, the plastic, and you help make this car. So you did create the car, but you don’t own the car because you didn’t own the resources that went into it. So you can see that creation is not a sufficient argument for rights.
Another example is if I steal your block of marble and I carve a statute into it, I’ve created a statute, but the original owner of the marble owns the statute, not me. So creation is not a source of rights, and to the contrary, if I find a hunk of marble, I didn’t create the marble. I just found it. I was the first person, so I’m the owner. So creation is not sufficient. It’s not necessary for rights. So if I carve a statute into that marble, the reason I own the statute is not because I created a statute. It’s because I own the marble that went into the statute. I already owned it. So we have this confusion about creation being a source of rights. It is not.
Okay, so the basic libertarian principles are self-ownership or body ownership, and ownership of any resource that could be disputed by identifying who owned it first and who got it by contract. Those are the basics of really all libertarian theory, and everything else is just the law working all this out. So now what is intellectual property law, and how could it be compatible, or is it incompatible with this?
The best way to understand what IP law is, is to – let’s take the case of patents. I come up with a new way to arrange my matter, to come up with an invention, let’s say. So let’s say that I invent a mousetrap. I take a piece of wood and some steel. I make a spring out of it and a hook. And I put it together, and now my wood and my metal is in a more valuable configuration than when I found it in its raw state in nature, so I’ve made a mousetrap.
Now I can catch a mouse with that. It’s useful. Someone else – so let’s say I start making these mousetraps and I sell them to make a profit, and I’m successful at it, and I make a lot of profit. Well, now what I’ve done is I’ve taught the world that it’s possible to make a mousetrap. I’ve taught them something. I’ve voluntarily revealed information that I came up with that I had secret in my mind and no one knew about, and I could have chosen to keep it secret, but I chose to reveal it to the world as the price of being able to sell it.
The only way to sell this mousetrap is to give it to people, and once I give it to them, they will learn that it’s possible to make a mousetrap. Now this knowledge is public knowledge. It is added to the reservoir of knowledge that the human race has, and for generations going forward, everyone knows they can make a mousetrap. And we can multiply this a billion times by all the things that we do now, things that we’ve learned from the work of our ancestors—how to make fire, how to fly airplanes, how to make cars, how to grow food, how to make clothing, how to make transistors and computers, all kinds of things like this.
And this knowledge is not different in kind than any other knowledge that we learn, knowledge of morality, knowledge of philosophy, knowledge of musical works, economic knowledge, history, knowledge of history. This is just knowledge that spreads, and people learn from it, and we have greater and greater base of knowledge as humans to dip into to inform how we act, to guide our own decisions. So if I tell the world how to make a mousetrap by selling a mousetrap, the design of which is public on its face, then other people might start making their own mousetraps. They take their own wood and their own steel, and they make their own mousetrap. And maybe one of them makes a better one than me, or maybe a similar one, and starts selling it, and he becomes my competitor.
This is what we are used to normally in the free market. This is called free-market competition, something that libertarians usually are in favor of. Competition means – free-market competition arises when you perform a successful action that you make a monetary profit from. And this price signal is an alert to everyone else that this guy has found a way to satisfy consumer needs because they are paying him a profit for these products that allows him to make a profit, and he is being rewarded for his satisfying of consumer needs.
And so other people learn from this, and they start competing with me by doing something exactly the same or similar. So McDonald’s starts making fast hamburgers, fast-food hamburgers, and soon you have Burger King and Wendy’s. Mercedes or Ford starts making cars, and now you have hundreds of car makers also making four-wheeled automobiles. This is how competition works, and every time an entrepreneur gets into the business of coming up with a new venture that he hopes will make a profit, he has to try to estimate the future by using prices and economic calculation to estimate his possible profits.
But he is also aware that the more successful he is, the more likely he is to attract the attention of competitors, and he will soon attract competition, which means that the initial profit he makes, which will be higher at first because he has a semi-monopoly position because he’s the only one making this new thing, very soon other people will compete with him. And he will have to lower his prices in the face of competition, and it will be harder and harder for him to keep making the original profit that he made in the face of competition.
So he has to come up with a business model that will allow him to recoup his original investment and make a profit and keep making a profit by continuing to improve what he’s doing and keeping a good reputation up. So competing in the market is a good thing. It benefits the consumers, and it keeps producers innovating and always working to be more efficient. And it doesn’t change when the product has an intellectual aspect or a design aspect.
The only difference is one of degree. So, for example, if I sell pizzas or hamburgers or automobiles, it’s not so easy for someone to build an automobile factory. It takes awhile for another competing automobile company to come up. So you have Ford and then General Motors and then Fiat and Mercedes and BMW. But they don’t crop up instantly and easily. It takes awhile. But if I’m selling a book, which is a printed page, in this modern age it’s easy to copy a book and print a book. And it’s easy to sell a book very identical to the book that the first author sold. Or if I sell a mousetrap, it’s pretty easy for someone else to copy what I’m doing and sell a mousetrap.
All this means is that in some fields, like pharmaceuticals or books, it may be easy to compete, which just means that the entrepreneur knows he’s going to face competition sooner. So it’s not as easy to make a profit or to keep that initial high profit going for as long. But this is not something that the state should be tasked with coming in and slowing down competition so that it’s harder for people to compete with me so that it’s easier for me to make a profit. This is protectionism, and this is contrary and anathema to libertarianism. So the best way to think about a patent right and also a copyright—but let’s stick with patents—is it is something that, in the civil law, which I’m sure Argentina is a civil law country, as is my home state, Louisiana.
It’s the only American state which is mostly civil law. That is, it draws on the Roman law and the Spanish law and the French law. In the civil law, there is a right called a negative servitude. In the common law, this is called a negative easement. Now, the way this works in the law is that when you own a resource, you’re the owner of that scarce resource, that object. And this ownership means that you can give people permission to use it, or you can deny them permission.
This is what ownership means, and this is why you can give them full ownership of it by a contract because you’re giving them permission forever. So contract is really subsidiary to the basic property right. Okay, but ownership of this resource gives you the ability to permit people to use it or not use it. Okay, so if I own, let’s say, a home, like a house and I live next to a bunch of neighbors, we all might want to live in a neighborhood where no one is permitted to use their home to have a pig farm or to have it for industrial purposes. We want everyone in this neighborhood to use their homes only for residential purposes.
So we can all sign a contract and agree with each other that only we get to use our homes, but we need the permission of our neighbors to use it for some prohibited purposes like commercial purposes. This is called a negative servitude because I, as the owner of my home, am granting to my neighbor a negative servitude, which means he can’t use my house, but he can block or prevent me from using it. He can stop me from using it in a certain way. This is perfectly legitimate under libertarian law and under private law if it is consented to. Just like if a boy kisses a girl, it’s legitimate if she consents. But if she says no and if he kisses her anyway, it’s assault and battery. So the use of someone’s property, which could be their body or their home, is legitimate only if the owner consents.
And in the case of a negative servitude, if the owner consents to it, it’s fine, and it should be enforced. What patent law does is the government grants this negative servitude to the holder of the patent, that is, the person who invented some technique or claims to have invented some technique. They give him this negative servitude, which lets him block me from using my property as I see fit. So if I have a patent on a mousetrap, I can go to government courts, and they can issue an injunction, which is backed by government force, preventing another person from using his factory to make mousetraps. That is a negative servitude, and the problem with it is that it was not consented to by the owner.
So this is essentially the problem with patent and copyright is that it’s the grant by the state of a property right in someone’s owned resource. So it is really theft or redistribution of property, and there are lots of negative consequences of this, which we can point to. But this case, as you can see, is not really consequentialist. It’s a fundamental principle case based upon the analysis of what libertarian principles really are. But of course, libertarianism is a practical doctrine designed to promote human prosperity and cooperation and peace and happiness.
And so the more that these principles are diluted or infringed by a corrupt legal system, the more damage it does to us. It basically makes us poorer by impeding and slowing down innovation and restricting property rights. So we are all poorer today because there is less innovation and technical knowledge available to us and less competition among producers, which results in monopolistic prices, higher prices than normal, and slower innovation, which makes us all poorer.
I mean we very well could be living in a world of immortality now and flying cars if the patent system had not slowed down innovation in a compounding way over the last 100 years. So I believe that, in addition to the other obviously horrible things that states do to us that libertarians recognize as evil, which is the tax system, central banking, which cause inflation and finances war, war itself and the drug war and government education, that is, government-funded school, those big five things, I believe patent and copyright are up there with those things.
And in fact, you could argue that it’s one of the worst of those because it does the most harm to us because it slows down the increase in this pool of knowledge that we humans have at our disposal and slows down prosperity for all of us. And it costs lives. It kills people. It makes us all poorer and restricts property rights and is unjust. That is the basic case against IP and why it should be abolished immediately and why it is one of the most evil things that the state does. So I will stop there with that little précis and open the floor to any questions that any of you have.
JUAN IGNACIO IBAÑEZ: So thank you very much, Stephan. That was an incredible, very clear explanation. And I’m just going to play devil’s advocate a little bit just to allow you to explain a little bit more and to help break down your position at least the way I understand it.
So you said that in order to act we need two things: resources and knowledge. And I pay attention that you made this distinction, and it seems that you made this distinction because later on you are arguing you can acquire property of your resources by becoming the first possessor but not over knowledge.
STEPHAN KINSELLA: Correct.
JUAN IGNACIO IBAÑEZ: And but then I could come to you and say, well, knowledge is a resource, and it feels that what you’re saying is, yeah, but it’s not a scarce resource.
STEPHAN KINSELLA: Correct.
JUAN IGNACIO IBAÑEZ: And I also take notice that you define – you didn’t use the word scarcity. You went straight to conflict.
STEPHAN KINSELLA: Correct.
JUAN IGNACIO IBAÑEZ: And this is interesting because say – back to the case of vaccines, let’s go back to 2020. In 2020, there weren’t many COVID vaccines, right? So I could say, well, vaccines were scarce. They were a scarce resource, or vaccine designs were a scarce resource but not according to your definition of scarcity.
STEPHAN KINSELLA: Correct.
JUAN IGNACIO IBAÑEZ: Because it’s conflict what matters.
STEPHAN KINSELLA: Correct.
JUAN IGNACIO IBAÑEZ: So the purpose of the law – so your position requires the purpose of the law to be the avoidance of conflict.
STEPHAN KINSELLA: Correct.
JUAN IGNACIO IBAÑEZ: But if I said that the – what if I believe – what would you tell me if I believe that the purpose of the law is not just to avoid conflict but also to promote innovation. You said that the difference between designing automobiles and pizza is a matter of degree, so when innovation is so much more important in our goals as a society than avoidance of conflict, what will you tell me to convince me that the law should not protect “intellectual property?”
STEPHAN KINSELLA: Yes. This is why I said that the argument is different whether I’m addressing a libertarian audience or a general audience because libertarians should understand that the purpose of law is not to promote innovation. In fact, the purpose of law – there are many values we have in society that we personally have as well. And you could arbitrarily pick any one of these values as what the law should do, but that’s not what we libertarians believe in.
In fact, the non-aggression principle is key to our philosophy because we understand that the only way to violate rights is to use force against other people. This is an implicit recognition that the entire purpose of law is to help us avoid conflict. The reason I use the word conflict – the word scarcity is ambiguous because it sometimes means lack of abundance. And sometimes in economics it has a technical meaning, which means basically rivalrousness, which I use the term which I made up called conflictable because that really gets to the essence of what we mean, but rivalry captures it pretty well. This is, in fact, one trick that statists use is they say things like, well, we believe that liberty is an important value, but unlike you libertarians, it’s not the only value.
So it’s just an excuse to regulate the economy because they say, well, it’s also a value that poor people don’t starve, and it’s also a value that children get educated, and it’s also a value that religion is supported. And it’s – you could come up with an unending list of values, and then you have to have a government committee balance these things. And liberty just becomes one value among many. But when we libertarians say we believe in the non-aggression principle, we are saying that it is unjust to aggress against people.
But if you add other values, then now you’re saying sometimes it is just to commit aggression against people because if it’s a value that people don’t become addicted to drugs and one way to achieve that is to make drug use illegal, now you’re violating people’s property rights by committing aggression against them by physically killing them or putting them in prison if they violate the law against drug use. So it’s one way or the other. You can’t have it both ways. Now, I would say that the only way to have innovation is for human minds to be free.
This is a practical thing. Humans have to exist and survive and prosper. In fact, we have to have enough time left over at the end of the day to have time to reflect and think and converse with people and to come up with new ideas. When we lived like cavemen and we lived a precarious existence where we’re living from sunup to sundown working our fingers off and we’re living a hand-to-mouth existence, there’s very little time to spend on ruminating and thinking.
And before we developed advanced language and writing where we could pass these ideas down, this is why the human race stagnated for so long until the modern era. So I think that the invention of the printing press was a big thing, and then the modern era of the industrial revolution were the two big areas where the knowledge exploded because it could be stored and learned and passed around. But obviously this requires people to be free. That means a free market where they can have enough prosperity to get to that point in the first place.
So there is no doubt in my mind that respecting the basic property rights, in order to avoid conflict, will have many beneficial consequences, one of which is innovation. So innovation will flow from free people, but for the government to have a policy, first of all, the government has to infringe property rights to enforce these patent rights, and it has to slow down innovation. So if I am making a mousetrap and I have a monopoly on that for 17 years because I have a patent, I have very little incentive to improve that patent, that mousetrap design because I can make my monopoly profits for 17 years.
And by the same token, people that would have competed with me and come up with improved mousetraps, they largely don’t bother investing in mousetrap innovation because they can’t sell their new mousetrap for 17 years. So the patent system slows down innovation by reducing the need for people to keep innovating and reducing the ability of competitors to innovate. So I think the premise is just wrong that – and not only that, the government is never good at anything. The government is good at only two things as far as I can see. The government is good at propaganda, that is, deluding us with the idea that it is necessary and that it benefits us, which is a lie and false. And it’s good at destroying and destruction. It’s good at killing people, starting wars, and putting people in prison and ruining lives.
But the government is not good at anything else. Even the things the government does that are in themselves not bad things like building roads, the government does a bad job of that, very inefficient, very sloppy, very wasteful, very corrupt. So the idea that the government can come in and fine-tune the economy by giving some people monopoly privileges to increase innovation is absurd. And in fact, all the empirical evidence studied over the last 100 years indicates that the patent system does not increase innovation. It just distorts it and slows it down.
JUAN IGNACIO IBAÑEZ: Okay, so the premise is wrong. I would like – I was going to ask you if you think your – the statements that you just made about innovation also apply to COVID vaccines. But since I believe so many people are going to ask that later on, I’m not going to ask this question and ask a different one, which is – so you said the premise is wrong. I want to make a question starting with the right premise. So let’s adopt a fully libertarian property rights framework.
And this is my question. So I’m holding in my hand this very contentious mask in Argentina. It’s called Atom Protect. This mask was the source of controversy because it was – its use was politicized. And recently there was this debate because the company, who was closely associated to the government, started complaining that there were copies, illegal copies violating the trademark of this mask. I know I’m shifting away from patents and going to trademark here, but since it’s still intellectual property I think it’s relevant. And it was funny because people who were asking how this was politicized, people who were asking for patents to be released were asking for trademark to be enforced and the other way around.
Now, if I adopt a fully non-aggression libertarian framework, I – it seems to me that if I want to buy this mask and not a fake one and somebody just copies the trademark, I’m being deceived, so this is fraud. So it appears at least prima facie that even in a libertarian framework, we should have intellectual property in the form of trademark at least. Is this wrong? Have I missed something in my reasoning?
STEPHAN KINSELLA: Yes. Let me explain why. So one reason I gave a systematic argument in the beginning is because the arguments from proponents of intellectual property are so diverse that every time you explain why one of them is wrong, it’s like playing the game Whack-A-Mole. They just come up with another one. So the really only way to combat them is to start from the beginning and go to a concise set of libertarian principles. And then you can use that to compare these proposed other laws and show why each one of them is wrong.
What happened was trademark evolved under common law, and there is a slightly anti-fraud aspect to the original trademark law, which I’ll get to in a second. But patent and copyright arose by legislation only, and they were both protectionist and for censorship purposes, and they could not exist without legislation. They were never called intellectual property. They were called – well, trademark was called trademark, and patent and copyright – or unfair competition. And patent and copyright were just called monopoly privileges or state privileges.
But when they were – when the free market economists in the 18th century – I’m sorry, in the 1800s started realizing how contrary to the free market the patent and copyright system were, and they started coming up with arguments for why patent and copyright should be scaled back or abolished the interests who were dependent upon these monopoly privilege grants started defending it by calling it intellectual property to make people think that it’s like a type of property or a natural right.
So it is these defenders of patent, copyright, trademark, and trade secret law that lump these different things together under the umbrella term intellectual property and forced us to use that term to object to them. And when I object to patents, then they say, well, what about trademarks? And the arguments I have to use are different because these are four different legal systems that the advocates of IP put under the same umbrella.
So it’s not my fault I have to use a slightly different argument, but we can use the original principles to explain what’s wrong. So here’s what’s wrong with trademark law. The reason fraud is considered to be a type of offense under libertarian law is because it flows out of basic property rights. Again, property rights in the main right, and the reason we can have contract is because the owner of a resource has the right to give it to someone else.
That’s what ownership means. But this implies that you can condition that transfer, like a sale. You can make it conditional upon something that the buyer does. Like I might give you an apple for your orange, and I want the orange to be a real orange. And so that’s part of our communication, our understanding about the orange. And if you lie to me and give me a rotten orange, you’re taking possession of my apple without my full consent because my consent was conditioned upon you giving me a good orange.
So fraud can be thought of as a type of theft by trick, so because it’s a type of theft, that is, taking someone’s property without their consent, you can see that it’s a type of trespass or theft. So fraud has to be thought of only as that, a type of taking of someone’s resource or using it without their fully informed consent or permission. So we shouldn’t use the word fraud to just mean dishonestly or deceptiveness.
Now, in the case you gave where a mask is sold with a trademark on it that is a lie, then the consumer is deceived. He is defrauded, but that is already covered by fraud law. So fraud law and contract law already prohibit the seller doing that, and he could be sued by the consumer for doing that. So why do you need trademark law? What does it add? Trademark law is something else. It adds something on top. What trademark law does is instead of giving the consumer who is defrauded the right to sue the seller, it gives it to the competitor who owns the trademark. But the competitor was not harmed. It was the consumer that was harmed.
So it’s a type of theft of this right to sue from the consumer to the original owner of that mark, which is wrong. And number two, he doesn’t have to prove fraud to stop you. He only needs to prove likelihood of consumer confusion. Now, consumer confusion is not the same as fraud, and the likelihood of consumer confusion is not a proof of it anyway. This is why, if someone wants to buy a fake Chanel purse, they are not defrauded because they know that this is a fake purse that costs 100th the price of the original. So the seller of the knockoff purse is not violating the consumer’s rights. He is not defrauding him. And the buyer knows that they are getting a fake purse, and they want the fake purse because it’s cheaper.
But the trademark holder, Chanel, can still use trademark law to stop that transaction. Why? It’s not because of fraud because there is no fraud. It’s because the trademark law effectively gives a reputation right to Chanel, which is very similar to what defamation law protects. And as Murray Rothbard explains in The Ethics of Liberty, in his chapter “Knowledge: True and False,” defamation law or libel law is also not libertarian because it implies that people own their reputations. But your reputation is just what other people think about you, and they have the right to think whatever they want about you because they own their minds and their brains.
They even have the right to think false information about you. They even have the right to rely upon lies about you to form their judgment about you. So to have a reputation right violates other people’s rights to their own minds. This is why a focus on what property rights are keeps this straight because if I own my body, no one else has the right to tell me what to think. So you can’t own a reputation because it would be owning what I think. So trademark law should also be abolished, although it doesn’t do nearly as much harm as patent or copyright.
JUAN IGNACIO IBAÑEZ: Thank you very much for that answer, and I think that – I have many more questions, but it’s – I think it’s time for other people to also ask. I know, Iván, you were also going to say something, so I’ll just let him.
IVÁN CARRINO: I have a question before allowing the rest. So, Stephan, very interesting, very persuasive. The standard argument for patents in the case of the vaccines is that – well, if there were no intellectual property rights, then who would invest? But my question is would it really be that different considering that the patent – it’s not the only entry barrier to create a vaccine. It’s not that you only need the formula. You need the infrastructure, the capital investment, the reputation, the history of creating good vaccines. So would it really be that different if we didn’t have intellectual property rights enforced by government, or what would be your – what’s your point of view there?
STEPHAN KINSELLA: Yes, it would be different. It would be better. There would be more innovation. So here’s the way to look at this. I’ll take the US as an example because I know it the best, and it’s the most impactful probably. So in the US, we have an extensive regulatory scheme called the FDA, which requires drug companies to go through this extremely time-consuming and very, very expensive regulatory review process, which of course the FDA should be abolished because it is illegitimate.
But this is one reason these companies have such huge costs, not to mention all the other costs imposed on them by regulations such as the minimum wage and corporate taxes and tariffs and other regulations. So it’s like the government imposes a cost on companies, and then they complain that it’s hard to recoup this cost with their products. And then the government gives them another intervention in the economy called a patent system to make it up to them. So it’s just like Mises says: Controls breed controls. If we get rid of the FDA, the costs would be much lower, and taxes, if we could lower taxes, these companies would have way more resources to invest, and they would have fewer resources to recoup in the first place.
Second of all, as part of the FDA process, these companies – it takes several years, and these companies are forced to divulge or to publish their secrets as part of the process. So after five years or whenever, when the product is finally approved, all their competitors are ready to go because they know what the company is doing because they had to reveal it. The FDA process forced them to. If we didn’t have the FDA, you would have a company engaged in research and development, which would cost much less. And they wouldn’t have revealed all their information, so when they start selling the product, they would have that lead time for many years before competitors can gear up and start competing. But then they would naturally have competition like they should.
But their reputation would still help them because, I don’t know how it is in Argentina, but in the US, name brand drugs like Tylenol that is for a pain reliever, still sells next to generic acetaminophen on the shelf, which is about half the price or less, and they both still sell. Some people buy the cheaper one. Some people pay twice as much or more for the more expensive one to get the better reputation. There’s no reason to think that wouldn’t exist with pharmaceuticals. And moreover, the cost of all these drugs is inflated by distortion because of the intervention of the government in the medical industry, that is, the healthcare industry with insurance, government distorting that, and also with the prescription industry where you have to go to a doctor to get a prescription to buy something.
In a free market, you wouldn’t need a prescription, and you wouldn’t have the government artificially raising prices of prescription drugs. You probably would have more natural drugs. What happens now is you have companies selling to consumers lots of prescription drugs, when a natural homeopathic drug might work better, because they can’t charge very much for that. They can charge a lot for the patented drug because it’s patented, and it’s expensive because of the FDA process and because the medical system forces people to take it, forces doctors to recommend it so they don’t get sued for liability, for tort liability. And the insurance companies will support it because of the socialized insurance system in their country.
So all these things together distort the entire thing. The tort system, the FDA system, government involvement in healthcare, and the patent system together have ruined and messed up the entire thing. I think without these things we would see a healthy – and one more thing to mention, if you look up the other good book on this topic, which is the book by Boldrin and Levine, which is an empirical or economic look at this called Against Intellectual Monopoly, which is free on their website, AgainstMonopoly.org. I think it’s chapter seven. They discuss the pharmaceutical industry and all the myths about it.
There were no patents in Switzerland and Italy for a 50-or-so-year period in the late 1800s and 1900s. And they were among the leaders in the world in pharmaceutical production even though there were no patents on pharmaceuticals there. So it’s just false that there would not be pharmaceuticals produced without them being given protection from competition by the state.
JUAN IGNACIO IBAÑEZ: Can I maybe just give one follow-up?
STEPHAN KINSELLA: Yes.
JUAN IGNACIO IBAÑEZ: I think you answered Iván’s question very comprehensively, but I’m just wondering what if I tell you, okay, I buy your entire argument for almost everything but not for all possible innovations. And as it happens, vaccines are kind of an exception. Well, maybe not vaccines themselves because, as Iván said, there are so many other barriers to entry that, in the end, you may find a way to say, look, you don’t even need patents to begin with. And there’s all these other inefficiencies. What about basic components that can be used in the product? But they are not in itself a product. And they don’t have an immediate application, which is in the case of the vaccines is the mRNA technology – mRNA technology.
So maybe – I’m not an expert on this technology, but as I understand, it initially didn’t have any immediate application. But it was – this innovation happened anyway, you could argue, because there was the possibility of getting a patent for when in the future they might have – we might – that application may be possible. So for the other kind of basic research, don’t you think patents would promote it?
STEPHAN KINSELLA: Well, so no. And I think you could make the same argument for the necessity for the state to tax people to take that money and to fund research, which they do. So there’s no end to this argument. In fact, the patent system is just a disguised form of that. It’s equivalent to taxing us and funding the National Endowment for the – I don’t know – the various agencies that are funded by government employees, and they give grants for people to do fundamental research. And then people claim that there’s benefits to this, and there are benefits to it, but there are costs.
It’s like when people say that NASA has spin-off technologies, like Tang, this great orange drink full of sugar that we all drink, great. We spent billions of dollars to put a man on the moon, and we get Tang from it, and some kind of toilet innovations. But Bastiat cautions us to think about economics as the long-run view and keeping in mind the cost of policies. There is the seen and the unseen. It’s the broken window fallacy. Yes, I can take money from someone and build something. I can build a skyscraper or a government building. But that money is now not in the hands of the original owners, and what they would have used the money for disappears, but we don’t see it.
So you could point to a couple of cases of increased innovation, but we don’t know what innovation was lost. And for all we know about the subjective nature of value, we can assume that overall we’re worse off because when you have two parties to an exchange and it’s voluntary, they both benefit from that exchange. That’s why trade makes everyone wealthier. Both sides are better off, but if one of the sides is coerced, we know he’s worse off, and we know that the other guy might be better off.
But because value is subjective and not interpersonally comparable, we can never know that society is better off on net because I’m harmed, and you’re made better off. Like if the government takes a million dollars from Bill Gates and gives it to me, I’m better off, and he’s worse off. Is society better off in total? It’s impossible to know. So the only way we can know that something makes us better off is if both sides are consensual. So anything that counts as aggression necessarily has to be presumed to make us worse off. I would also point out that no one can argue with a straight face that we would have no innovation or no pharmaceuticals without a patent system.
What the argument is, is that you would have some innovation but not enough. In other words, it’s basically the same old market-failure argument that the free market is suboptimal and that the government needs to step in and interfere and tweak the economy to make things better. Now, the government is bad at doing that, and I think it’s impossible, and their interest is not in doing that anyway. If we did have a patent system tailored in a more rational way so that you have a longer term for pharmaceuticals and a shorter term for software and this and that, it might make a little bit more sense.
But then who’s going to be in control of that, some government committee, which will be corrupt and be bribed to do it in the wrong way? And plus there’s no scientific or objective standards for any of this. It’s all arbitrary. So the only way to improve the patent system is to reduce the scope of patents and the terms. Seventeen years is too long. Sixteen years is better. Two years is better, and zero is the best. Most patent advocates assume that we have a curve, a Gaussian curve. Zero is not enough, and an infinite term is too much.
Somewhere in the middle we have a peak, and we need to find that peak. And most people that criticize the patent system like some libertarians like Alex Tabarrok, they think we’re too far. But they have no empirical evidence to justify that because they don’t know where the peak is. No one knows because this is all made up, and economics doesn’t work with these empirical numbers anyway. It’s all subjective. It’s really this. It’s a downward-sloping thing. The more patents, the worse off we are, so the fewer patents, the better off we are.
JUAN IGNACIO IBAÑEZ: Great, fantastic. Now, I’m picking a few questions from the public, just one or two. I’m going to combine two, and then we’ll have two in total. So first question is from Jamero. He is buying your case at least for the sake of the argument, but only for the future. So he is saying, okay, but now companies, they have already invested in this intellectual – in these vaccines. So shouldn’t we – if we buy your argument, shouldn’t we release – abolish IP for the future only but not for existing IP since investments have already been done with a view to this?
STEPHAN KINSELLA: Well, I would take that deal because it would be an improvement, and we could finally move forward. But of course that would not be optimal. It depends upon the type of policy you’re talking about I believe. If you take some fundamental acts of injustice like, let’s say, people in prison now for drug crimes, or if we have slavery like we had in the US in the 1800s, should we abolish gradually, or should we abolish instantly? I think the answer is obvious.
The patent system is totally corrupt and unjust, and no one has a right to use the force of the state to stop competition. If they relied upon that patent right when they came up with their business model, then too bad because they were counting upon the perpetuation of a totally evil and unjust policy. And I think if you build your business model around the perpetuation of a policy that’s evil, then I don’t have any sympathy whatsoever for you if you lose that right. So no, I would abolish it immediately if I could.
Maybe some other things I wouldn’t, like I don’t know if I would end social security right away because you have some old people that depended upon it, and they are helpless now because we’ve made them helpless. I don’t know if I would just have all the soldiers guarding the nuclear bombs walk away tomorrow and let them fall into whoever homesteads them. Unfortunately the state has made such a mess of things that we need some kind of orderly transition for some things, but not for patent and copyright.
I think immediate abolition would be an instant boon to humankind with no victims whatsoever except for people that are unjustly profiting off of them like the music industry and Hollywood and certain technology industries. However, I would say that as a practical matter, any abolition, which is very unlikely, would always come with a transition period. And it would keep people like me employed for 20 more years sorting out the transition period. So all you guys are doing is giving tons of work to people like me to soak away productive assets from the economy.
So I’m happy. I have a nice house, so I guess I can keep benefiting from this illegal system just like drug attorneys – defense attorneys make money defending people for drug crimes. Tax attorneys make money helping people navigate an unjust tax system. And oncologists make money trying to stop cancer, and if we were to succeed in getting rid of tax laws or the drug war or curing cancer, these guys would be out of a job, and that’s a good thing.
JUAN IGNACIO IBAÑEZ: Fantastic. Fantastic answer. I’m guessing you would have a job for contractual IP or something still. You wouldn’t be – with complete abolition, you wouldn’t be completely jobless.
STEPHAN KINSELLA: I would transition to Bitcoin law.
JUAN IGNACIO IBAÑEZ: Okay. So then there was another question. I think you have answered this already, but I’m just going to restate it in case you want to add something else. So somebody is asking how you would convince an entrepreneur to invest upfront if there’s no protection. And somebody else adds to that. You gave the example of copying a mousetrap, well, that’s easy. Copying a vaccine, developing a vaccine is not. Sorry, developing a mousetrap is easy, but developing a vaccine is not. Do you think an entrepreneur would be convinced by your argument, or how would you make him convinced?
STEPHAN KINSELLA: Well, my argument is not to convince the entrepreneur to invest. It’s to convince people to agree that IP law should be abolished. It’s a policy argument. Again, this is why I gave the example earlier about competition can be easy and fast or slow and difficult. And different ventures face – different entrepreneurial ventures face different types of competition. And you just have to take that into account in the type of venture you go into.
As I said, if you studied the book by Boldrin and Levine, just read that one chapter seven or – it’s either seven or nine on pharmaceuticals. You’ll see that Switzerland and Italy had thriving pharmaceutical industries when they had no patent protection for pharmaceuticals. And again, no one will say that no one will invest in innovation. All you can argue is there will be not enough innovation. But then you get into this argument that the goal of law and the purpose of government is to intervene in the free market to make sure we have the optimal amount of innovation.
But there is no objective standard to determine that, and there’s no stopping point because – so let’s suppose that there would be X amount of pharmaceuticals invented in a free market. And let’s just suppose there would be one-half X invented – I’m sorry, 2X if we add a patent system, which I think is false, but let’s say that we have a patent system. And now people have an incentive to develop more drugs because they can invest more money into it because they can sell it at monopoly price for a longer time.
It’s kind of sad that libertarians are arguing for people’s ability to sell at a monopoly price, but whatever. So let’s say that it does double the amount of innovation. But what if that’s not enough? What if we need five times? So the patent system only gives you so much extra incentive, so the only thing we can do is make the patent term longer or maybe increase the penalty from a financial penalty to execution or prison time, or maybe the government has to actually subsidize it, which they do.
So there’s no – so maybe the government should spend $75 trillion a year on subsidizing innovation to get a little bit more innovation to go from 2X to 3X or to 10X. Where is the stopping point? Then we make the human race starve off because we’ve taxed us of everything. So people say be reasonable. Let’s just do a reasonable amount of taxation or a reasonable amount of patent law. But there’s no standard there. They just want to have a pragmatic ad hoc approach with no standards whatsoever and let a government – a committee of government bureaucrats, which is what the congress and the legislature is or what the patent office is, or it’s what judges are that decide these cases. Let them just decide, but that’s just kicking the decision to a bunch of government state actors, which are corrupt and have no objective standards to guide them. The whole thing is a mess and absurd.
IVÁN CARRINO: Thank you very much, Stephen – Stephan, sorry, Stephan. I’m going to take this question from the audience, and it will be the last because we’re – otherwise we will take too much of your time, of your generous time, and well, that’s not the idea. And thank you for your presence here. [indiscernible_01:10:38] says that in these situations the world needs full and global scientific cooperation for global issues and problems and also governmental cooperation. What’s your point of view here? What would you answer in this case?
STEPHAN KINSELLA: I don’t know if I disagree with that, although I’m an anarchist, so I think governments should be abolished. But to the extent we have governments, I do think cooperation is better than war, which is why a lot of libertarians hate the United Nations because it’s a centralist threat to the world, a one-world government, all that. I don’t think it’s so much of a threat because the United States is so dominant it will never let the UN take over. So I think in the meantime, having a forum for nations to at least try to resolve disputes amicably is a good thing.
I actually think that the patent system impedes cooperation because it forces people to try to keep their ideas secret until they can patent them and get credit for them. If people knew there wasn’t a patent system, then they would know that they could benefit and use whatever information they – is out there. In fact, people misunderstand the patent system’s official purpose. People think the purpose of the patent system is to incentivize research and innovation, but it’s not.
It’s to encourage people to disclose. So before a patent system, people could use what’s called trade secrets to keep their information secret as long as they could as a proprietary secret. But quite often you can’t do that. The mousetrap example is an example. You can’t keep the design secret if you want to sell it. For some things like the way you make a chemical, you can make the chemical secretly, and no one knows how you made it. I’ll get them in ten minutes. But – I’m sorry. I lost my train of thought. My wife just walked into the room. Remind me. Where was I?
IVÁN CARRINO: You were in trade secrets.
STEPHAN KINSELLA: Oh trade secrets. So in a world without patents, people keep some things a secret, and the idea of the patent system is to give someone a monopoly for 17 years in exchange for them publishing a patent disclosure that makes it public. Now, when you make this information public, people are supposed to be able to use it, but they can’t use it for 17 years. So they finally get to use it in 17 years, but the truth is that for certain types of products, the things you can keep secret you don’t usually publish that in a patent.
You keep that secret anyway. So the only thing the patent system does is it encourages people to publish ideas that they would have had to make public anyway by selling the product. So they’re given a monopoly in exchange for doing nothing because they’re revealing public – they’re revealing information about their invention, but they would have had to do that to sell the product anyway. So we really get no extra disclosure out of the patent system because the things that you can keep secret, you keep secret anyway, and you don’t patent it because a trade secret can last forever, whereas a patent expires in 17 years.
IVÁN CARRINO: Well, thank you very much, Dr. Kinsella. It was a pleasure and honor for ESEADE to have you here. Just a few words in Spanish. [Spanish]
JUAN IGNACIO IBAÑEZ: He just said, Stephan, that it’s an honor to have you here. Thank you very much for offering to do this, for agreeing to do this in front of this sort of audience, and in Spanish. [Spanish]
STEPHAN KINSELLA: Thank you very much, and I appreciate everyone’s interest in this topic, which is not easy, and for allowing me to speak in English. And I welcome – if anyone has any questions for me, feel free to ask on Twitter or Facebook. And I’d be happy to do a follow-up at any time if you’d like, and if you want more research – if you want more information, just go to my website. The focus is on IP, which is C4SIF.org. It’s Center for the Study of Innovative Freedom. I have a lot of resources there for people that are interested and some works translated into Spanish on my site too.
IVÁN CARRINO: I’m copying the link of your website here, and I have also shared your book, which is translated in Spanish. [Spanish]
STEPHAN KINSELLA: Gracias.