Jeffrey Tucker Archives

Does Monopoly Create Wealth?

January 24, 2009 9:13 AM by Jeffrey Tucker

[This is part 2 of my live blog of this book]

How strange this "intellectual property" issue is. In normal life, we tend to (or should) credit enterprise and markets for most innovations that surround us. I'm typing on a system here that includes products for several dozens different creative companies, with hardware and software and applications of all sorts stitched together through some miracle we call the coordinative power of the market. No news in that, I suppose. Ho hum.

But let the subject of IP come up, and most people will say that we only have this stuff thanks to IP. Think of the shift here. On the one hand, we credit markets. On the other hand, we credit monopoly. Both can't be true. Or if both are true, we have a serious theoretical tangle to unravel. So which is true?

This is the topic addressed in the second chapter of Boldine and Levine's Against Intellectual Monopoly. They begin by observing that "virtually none of the innovations" in the digital industry of computers" took place with the protection of intellectual monopoly."

Before 1981 it was not possible to patent or copyright software. The craze to patent every mouse click began only following a 1994 court ruling (In re Alappat). Meanwhile, the underlying guts of all that you see began long before. As with all genuine economic revolutions, the foundation of end-user consumption was decades in preparation. The compilers, assemblers, linked listed, databases, search algorithms, displays, languages, word processing: all began long before the age of software patents or copyrights.

Let's see how this works. Property rights are protected. Trade is free. People made useful stuff. People bought stuff and used it. They imitated and emulated each other and improved things step by step through investment, profit, and re-investment. That's all. All development since this great age of innovation that preceding software IP has built on this foundation of open-source material. Bill Gates: "If people had understood how patents would be granted when most of today's ideas were invented, and had taken out patents, the industry would be at a complete standstill today."

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Matsushita and the Patent

January 24, 2009 6:09 AM by Jeffrey Tucker

A reader sends this:

In 1932, Konosuke Matsushita (founder of Matsushita Electric/Panasonic) negotiated with a man to use Japanese core patents for the radio. The man had acquired the patents from someone else, but had no intention of manufacturing radios or creating jobs, he just wanted to extract a princely rent for them. Mr Matsushita thought him to be arrogant, but eventually paid a princely sum of 22,000 yen to buy the two patents. The retail price of an electric iron was 3 yen at the time, so 22,000 yen was a fortune.

Mr Matsushita didn't use the patents to create a monopoly for his company. He put the patents in the public domain so any manufacturer could use them, free of charge. He wanted many competitors to build an industry that would create jobs, drive down costs, fuel innovation and enhance the lives of everyone. He was happy to compete for market share and asked his employees to do it by building the best radios they could at the best cost.

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