Luckily more textbooks are being written without a copyright (or a with a limited copyright) these days. In fact, a great textbook that I learned economics from was written open source by R. Preston McAffee, a professor at Caltech. (If anyone’s interested, you can download it at http://introecon.com/)

Thank you Kinsella for this post. Both very self revealing and very relative to Mises’ Calculation Argument.

Especially about the entertainment part. The other areas it seems Levine has no clue but some simple assertions but entertainment part is revealing.

Levine it seems concedes that after we socialize private intellectual property we could only enjoy amateur entertainment like home videos, and garage composed songs instead of the quality products from the professionals.

Which is exactly Mises’ conclusion regarding socialism because of the calculation problem.

Mises states, since there can not be an exchange economy when there is no private property, there would be no prices. Since there will be no prices to relay information about consumer demand, there would be no way to allocate the scarce resources that is needed to produce intellectual property.

This setup can only work in a primitive economy, where no division of labor is possible. In this case a primitive industry. A primitive industry of intellectual works where no division of labor is possible.

I don’t think Levine have heard of Mises but he at least concedes to the same conclusion, at least for entertainment industry.

On the other hand why when it comes to entertainment industry does he concedes this but when it comes to scientific knowledge and software he makes opposite assertions without proof?

Odd isn’t it? Entertainment would be handled by amateurs but science, text books, and software would not be. They would be even better.

Well I guess entertainment is not that important. At least not as important as scientific research. Socialists tend to know whats best for you better then you.

“We would lose lots of quality entertainment but so what? Lets concede this and we will be more believable on the other more important sub sectors because all we do is assert without a proof.”

Yeah. Nice try. Good thing we are familiar with the socialist line or reasoning and argument.

I don’t know about you, ktibuk, but I am excited to turn over my creative output to the state! In fact, I am so excited that it will really incentivize me to create more! I wonder how much money John Lennon’s estate has made on the song, “Imagine?”

I encourage Kinsella and Levine to partake in the production of a Hollywood movie, professional software development, the writing of a university textbook (which usually has a very small market), or in the development of some drug/vaccine – before they comment more on this issue.

@Drake,

I never claimed Mises handled the IP question with his calculation argument. He handled socialism in general and demolished it handily.

I said, Mises’ general calculation argument can be applied to IP problem. Which Silas and I have done. See, some people dont just memorize and quote past thinkers, but try to understand theit methods and apply them to other places.

If you knew anything about Mises, calculation problem and economics for that matter, before jumping into arguments about IP you would have known this.

But still if this argument helped you to that path of learning I am glad. But I suggest you start reading original material and try to understand the issues instead of running to wikipedia when you confront something you dont know.

I wish it was more detailed, but it’s an interesting read nonetheless.

First of all, I am not at all convinced of whether intellectual property is a good idea or not. On the one hand it does stifle innovation once it is on the market, but on the other hand it encourages it by giving the assurance that its cost will be met and for the scientific industry it provides an incentive for it to happen sooner rather than later because of the race to patent.

I have some questions for you:

Why would anybody invest millions of dollars in huge blockbuster movies with million dollar actors and million dollar special effects for something that would end up being free? Would these kinds of movies or any other similar artistic productions still exist in an intellectual property free world?

Shouldn’t some intellectual property exist for things like brands and names?

If open source software is a viable alternative to today’s copyright software, why haven’t open source software been created in all areas which are better than their copyright counterparts? I’m not talking about Linux, but about professional software which is very expensive.

Silas and you have done nothing of the sort. Why pretend otherwise? To bastardize Mises’s arguments into something they’re not?

I think the question of whether IP protection is mostly good or mostly bad is irrelevant.

The question I have is how would you enforce effectively it in a stateless society? Enforcement is already problematic.

You can protect physical property with locks and guards. Would social ostracism be sufficient? Would IP pirates have problems getting insurance contracts? Should the use of violence be considered justifiable against someone who steals your IP?

If IP rights cannot be enforced, does it really matter if IP is good or bad?

Inquisitor

“Silas and you have done nothing of the sort. Why pretend otherwise? To bastardize Mises’s arguments into something they’re not?”

Is this all you can do? Make an assertion without backing it up? It seems this is all you IP socialists do.

Why don’t you analyze the situation and tell us how scarce resources would be allocated reflecting consumer demand, where and when IP rights are abolished?

Or at least concede, as Levine did for entertainment industry, that there wouldn’t be professionally created entertainment but “amateur home videos”, and “talking to friends on the phone” but that would ok. Entertainers shouldn’t be making more than professors anyway, right?

@ktibuk

“Why don’t you analyze the situation and tell us how scarce resources would be allocated reflecting consumer demand, where and when IP rights are abolished?”

Consider the “points of control” held by the producer of original works. They control:

1) IF they will produce or not

2) WHAT they will produce

3) WHEN production will begin and end

4) WHERE, HOW, and WITH WHOM they will produce

5) WHEN and in WHAT MANNER they will release their product.

These five points of control are incontestably held by producers of original works. They are not susceptible to the affects of copying, but have yet to be widely exploited in business models.

The key is for the producer of original works to sell control of these points directly to the consumers of their works. Here are some examples corresponding to the above five points of control:

1) Raise a minimum in pledges before agreeing to produce something.

2) Have a bidding war to decide what exactly to produce.

3) Determine the production schedule based on funds received.

4) Determine specifics of production (location, equipment, contributors, collaborators, etc.) through bidding.

5) Once the product has been completed, samples may be released for free. The full product may be withheld until a minimum number of pledges is received. In addition, a premium could be paid by those who wish to be the first to receive the product. This could be accompanied by scarce goods or services (memorabilia, private visits with the producer, etc.).

Happily, some of these points of control are already part of a successful business model:

http://www.artistshare.com/home/default.aspx

The main significance of ArtistShare is that they are selling something non-copyable: direct access to the artist’s creative process. For example:

“Welcome to the Haydn and Dvorak Project on ArtistShare. As a participant in this project you will have a front row seat as we explore the creative process behind the St Lawrence String Quartet and the making of this exciting new recording. The Haydn and Dvorak project also provides the unique opportunity for fans to play a vital role in the creation of new music by the [Quartet]. Premium participant offers include credit listing on the final album!”

Attending recordings, participating in the creative process, and being listed in the credits of the album are all non-copyable which makes them crucial aspects of a 21st century business model.

Even without copyrights, software can me made difficult to copy.

Microsoft has proven time and time again that they can make the lives of their customers extremely miserable by forcing them to submit to a lengthy and frustrating “activation” procedure.

So software could be written to run on individual computers and no other computer.

So software companies can code their software to restrict it’s use as much as they want without copyright laws.

I could write a software that only runs on your machine and not even your co-worker’s “identical” machine.

So concerning software, let’s leave that to private companies. They will decide how to restrict their software and customers will decide whom they buy from.

If customers are fed up with intimidating “activation” procedures, they will switch to open software etc.

If they are happy with Microsoft’s bullying and prices, they will stay with them.

Or, if the customer’s are savvy, they will write their own OS.

End of the story. Copyrights are not needed.

@Drake

Thanks for finally trying to solve the problem. This would be a much productive way to spend our time instead of personal quibbles.

What you are describing in your post is a way to allocate scarce resources but a very narrow one at that. One way where the consumer and the producer face eachother and there are no intermediaries and no calculation. Since the consumer relays the information directly there is no need for prices to relay any signals.

But as I said, this only represents a very narrow scope of entertainment industry and it isn’t very effective since mass production is not possible. Mass production is not possible because consumers that need to get together are way to many and this causes problems.

Actually this business model is being used not only for IP but for tangible goods too for years.

It is called “custom made” industry. From clothes to furniture, or from songs to software “custom made” industry has a niche market.

But as I said a very small market and this industry is not an answer to calculation problem per se but a business model fit for small markets that doesn’t need calculation at all.

The beauty of the free market under price system is that millions of people that have nothing to do with each other, can allocate scarce resources as efficiently as it can be done. And although it doesn’t represent all economics, intellectual production industry is a very big, complicated and important industry which needs the price system.

Scarce resources – i.e. those to which property rights apply, i.e. NOT ideas, will be allocated by the market. Non-scarce things, i.e. ideas, do NOT need such allocation, contrary to the exaggerated histrionics of Silas and yourself. If anyone wants to secure an idea, they’ll have to do so via means such as DRM, non-disclosure agreements, contractual limitations on what is sold etc. And that is it – there’s no property to be had in a non-scarce thing, an idea. Get over it and put an end to the histrionics.

Inquisitor

“Scarce resources – i.e. those to which property rights apply, i.e. NOT ideas, will be allocated by the market. Non-scarce things, i.e. ideas, do NOT need such allocation, contrary to the exaggerated histrionics of Silas and yourself. ”

How will scarce resource, like the factors of production when it comes to ideas, will be allocated by the market?

This is the question.

And “they will be allocated by the market” doesn’t answer the above question.

But it answers the question about how much you know economics.

“How will scarce resource, like the factors of production when it comes to ideas, will be allocated by the market?

This is the question.

And “they will be allocated by the market” doesn’t answer the above question.

But it answers the question about how much you know economics. ”

No, rather it shows that I do. Only the market can efficiently allocate scarce resources. Ideas, not being scarce resources, do not require this. The factors of production will be rewarded according to how much money they can rake in, i.e. their discounted marginal value product (and not some “intrinsic value” or somesuch nonsense that an idea is supposed to have.) If a firm errs, they’re out of luck, like any capitalist venture, so it had best make sure it can profit, or else not take the leap. Still, that has nothing to do with property in ideas… since, they’re still not scarce, hence not in need of economization. Property exists in the factors of production that are actually scarce, hence in need of economization. If ideas need FOP to be “produced” or whatever you think it is, they’ll be rewarded according to how well the firm markets its product. They deserve no more than that, and certainly not property in something not even the object of appropriation. If anyone knows nothing about economics, I’d say it’s you, and the troll that goes by the name of Silas. Try again.

Inquisitor,

“No, rather it shows that I do. Only the market can efficiently allocate scarce resources.”

Yes we know that but economics is the science that explains market phenomenon, ie how markets work.

And Inquistor have you really heard of the “calculation argument” before? If so could you please summarize it for us?

Inquisitor,

You are missing the fact that no matter how abundant (or non scarce) the end product in IP is, they have to be produced and the factors of production that go into them are scarce.

You may copy “Harry Potter” infinitely but it takes mainly Rawling’s time and possibly other factors of production (like office space, computer, research material, etc) to produce “Harry Potter”, and all these factors are scarce. If they are not employed ib creating the novel, they would be used for something else.

So they need to be allocated.

Now, prices form top to bottom in the markets. First consumer good prices form, and then these prices reflect upon the producer goods that produce those consumer goods. If there aren’t any alternative uses for some factors of production then they may be valued by bargain but this is a exceptional case.

So if there are no consumer good priecs for IP, we can not get any prices for factors of production.

Lets focus on the producers time, because when it comes to IP time is most used factor of production.

If we can not get the producers “price of time” as a factor of production, because there are no prices for IP as a consumer good, this means the producer has no way to compare the value of his/her time with alternative uses.

This effectively means, without any consumer prices for songs, novels, movies, software, etc there would be no way to know how much of each would have to be produced to satisfy consumer demand.

Also this means there would be no division of labor when it comes to the production of IP. No writer, composers, movie actors, software engineers, because there would be no prices for the time of these producers.

These jobs would only be done as hobbies.

And technically, I think you are much more of a statist “socialist” if you support IP and the control of private property that it inherently brings.

(Please excuse the crossposting, ie quoting myself, but my defense of us IP-opposers against the “IP-socialism” charge has not been answered and I see no need to rephrase it. ):

I think the reason for ktibuk bringing up the subject of “the calculation problem” is his contention that anti-IP people are “IP socialists”. The calculation problem is an argument against the viability of a socialist economy. If all property has the same owner (the State) then there are no prices, so there’s no possible calculation of costs and benefits, ie no economic calculation, so there’s no way to determine numerically which form of allocation of scarce means is the most efficient.

Since ideas are not resources, they are not subject to scarcity, there’s no question of how to allocate them and no economic calculation problem regarding ideas qua ideas.

Mental effort OTOH is a kind of labor, that is, a particular use of the scarce resource that is the human body (particularly the brain).

Each person’s brain belongs to this person, so there is indeed a market where mental labor can be integrated in a cost-benefit estimation, and there’s no more of a calculation problem about how to allocate mental effort than there is about how to allocate physical effort.

In order to emphasize that IP opposers are nothing like “IP socialists” let’s consider what a true “IP socialist” would think.

Socialism is, roughly speaking, an economic system where all property belongs to the State. So, a precondition to be an IP-socialist is to believe that there is indeed such a thing as intellectual property, and that it should belong to the State. Since the physical translation of so-called “Intellectual property” is the legal monopoly on the activity of producing and transmitting certain patterns of information, an IP-socialist believes that whoever comes up with an invention or an artistic creation, a legal monopoly on this new idea should be automatically granted to government officials, who would take care of this newfound property. Nothing remotely similar to the anti-IP position.

@Claudiu:

“Why would anybody invest millions of dollars in huge blockbuster movies with million dollar actors and million dollar special effects for something that would end up being free? Would these kinds of movies or any other similar artistic productions still exist in an intellectual property free world?”

I think they woud. The reasons why virtually all Holliwood-sized projects nowadays are financed through copyright are the following:

1) The economic incentive of intellectual monopoly drains the market from the most valuable actors and directors. Many of them would do the same for free in their spare time or for a much lower benefit, but they don’t have to, so they don’t.

2) The movie industry, under copyright, is producing a steady stream of entertainment. If that weren’t the case, moviegoers would start thinking up ways to get more movies by economical incentives (money pledges, prizes, etc). Also, it may be that wealthy amateurs would spend more money in producing “deluxe home movies” with professional actors and special effects, just for the attention they would get among their fellow movie fans; nowadays they would be drowned in the Holliwood noise.

3) The burden of IP costs consumes wealth that could otherwise be destined to money pledges, prizes and the like.

In summary, when there is the possibility of a legal intellectual monopoly, the competitive advantage of using it is so great that every other business model is marginalized, which reinforces the wrong belief that no other business model could ever offer a significant incentive. That is, people wrongly conclude that the IP-free world would be something like the IP-free parts of the current world.

Let’s apply this to the software market. Suppose you have a manufacturing company and you think a better CAD program would improve your sales. In an IP-free world, you could, for instance, talk to a software development company and propose a deal: they write the new CAD program for you and you give them a share of the increase in sales revenues for a given time. This way you don’t even need an NDA, because it would be in their own interest not to publish the program immediately, and their incentive to sell it to your competitors would be more or less neutral. The less you sell, the less they get from you. The incentive is there and the business model works, but nowadays it’s not the most frequent way of financing a software project. Why? Because with intellectual monopoly, the costs of development are shared by all the future users of the sofware. This means that the software company can afford to charge less to the manufacturing company, so neither the manufacturing company nor the software company have an incentive to use an open license.

In conclusion, I’m convinced that an modern open knowledge society would be a fury of innovation and artistic originality, of which the current pools of intellectual freedom are a pale shadow at most.

Inquisitor: The price of the innovator’s good (which instantiates the idea) is the same as the copier’s good (which instantiates the idea), at least the in the limit, since the innovator must price competitively. Unless you want to claim the the zero difference in price-able-to-charge-due-to-innovation is correctly set at zero — therefore claiming that no one values better products — you have the concede that there is calculational chaos.

I seriously doubt you would make the argument in any other context. In such contexts, you recognize that the harm of a $0 price control/ban on a product could not be eliminated by this “bundling” with other goods. Yet here you do. And no, “cheap copiability” does not make a difference *in this respect*.

By the way, does any published anti-IP pro-calculation-argument person want to try to tackle this point? Stephan_Kinsella, Bob_Murphy, Roderick_T._Long, Jeffrey_Tucker, Hans Hoppe…? I want to hear from someone who is widely recognized to “get” the calculation argument, and what they have to say about this.

I mean, there *is* some response to it, right?

Whilst slagging off IP, Kinsella wrote: “since copyright is de facto gone anyway”

OK, so what is the problem? Why debate so strenuously about something that is “gone anyway?”

@Silas
Thanks for your reply. Let’s see:

“Ah, and right off the bat you go astray. Ideas most certainly *are* resources, under the normal definition of the term. As people normally speak, a “resource” is “whatever allows greater want-satisfaction than its absence”. And notice that someone who merely brings up relevant information is considered “resourceful”. Hm.”

We can safely disagree here, since it’s irrelevant to the issue at hand. Notice that I said “since ideas are not resources, they are not subject to scarcity,…” . So, delete the “since ideas are not resources” part and let’s move on.

“This still doesn’t address the point ktibuk and I have repeatedly made. Even if you’re right that there’s “no question of how to allocate” already-produced ideas, there is the still the question of how to decide which ideas to produce, and whether to produce other goods instead of ideas. ”

And the baker has to decide which kind of bread to produce, or whether to produce something other than bread. Every participant in a market economy has to solve a little “calculation problem”, namely deciding how to best allocate his resources (including time and effort) in order to maximize benefits. But he knows what he wants (money) and he just has to estimate the best way to get it.

The “calculation problem” Mises talks about, can never happen in a market economy, even without money, and I would add it can never happen to a Robinson Crusoe. It can only happen when a single player (the State) owns the resources of every citizen, AND it intends to use them in the most “efficient” way, that is, with the best overall satisfaction of people’s wants. Now, in a market economy people express their preferences in the form of prices (be it in money or relative to other commodities), so the calculation is possible for each participant. Robinson Crusoe doesn’t have a market, but he knows his preferences, so he can allocate his resources accordingly. But a socialist State has no direct access to the minds of the citizens and no markets, so it can’t know their preferences, therefore it can’t know how efficient its resource allocation policy is. That’s the calculation problem.

“Weak *correlates* of the idea can be sold without IP, but the idea itself cannot be. While someone can sell his mental labor on a market, the bids for it will not represent social valuation of the ideas in the absence of IP, because only a small fraction of that demand will be visible to the buyer.”

If by “selling an idea” you mean selling the monopoly on the use of the idea, then indeed it can’t be sold in an IP-free society. But “selling an idea” may also mean communicating an idea for profit, for instance, after a money pledge, a sample, independent assessment by a critic, and all forms of arbitration the market finds convenient. In general, neither the artist who hopes to collect a monetary prize, nor the one who is releasing his works in a money-pledge business model, are “selling their intellectual labor” in the strict sense. They are self-employed, using it to create products from which they seek profit.

The concept of selling your intellectual labor, by analogy to selling your physical labor, would be better applied to a situation where you agree to use your skills in manipulating someone else’s property (for instance, a hard disk where you write a novel) who owns the modified property at all times, and you do this for a fee.

“While someone can sell his mental labor on a market, the bids for it will not represent social valuation of the ideas in the absence of IP, because only a small fraction of that demand will be visible to the buyer.”

I can’t make sense out of this sentence. Which demand? Who is the buyer? Why only a small fraction of that demand is visible to the buyer? How can the price of someone’s mental labor not be associated to how much people value his ideas?

Regards,

I encourage Kinsella and Levine to partake in the production of a Hollywood movie…before they comment more on this issue.”

yeah probobly…

wiki says this about ‘the godfather’….. “The Godfather was an enormous box office hit, smashing previous records to become the highest grossing film of all time. It made US$5,264,402 in its opening weekend and went on to gross $81,500,000 in its initial run;[25] nearly fourteen times its budget and marketing campaign. Re-releases boosted its North American total to $134 million.[25]…..Budget $6,500,000″

http://en.wikipedia.org/wiki/The_Godfather

now this was back in 1972..the article also says that robert duvall made 35k in two weeks of movie-ing.
decent dough back then i guess.

i used to deliver the movie films to theatres. it would be several of these steel octagonal cases containing the film rolls.

i am not sure , perhaps someone else can confirm this….but i think the movie film was stored and shipped from a regional warehouse that held lots of other movie films.

i assume the production (movie) companies owned the actual film and shipping canisters and rented out the physical material for the theaters to charge admission to come and view.

according to wiki…’the godfather’ did quite well using a ‘admission to view’ scheme before any copying type schemes were in place (unless there were bootleg film copying machines around en masse in 1972). i was only 3 then.

who knows…maybe a digital copyable release would generate additional traffic to theater admission re-releases…making even more money.