Two researchers at the Mercatus Center, a think tank that produces excellent research on any number of economic issues, have published a challenge to intellectual property — trademark, copyright, and patents. The paper ridicules claims made by a number or sources in the last few years that laws which protect intellectual property (IP) create jobs. For example, The U.S. Chamber of Commerce’s Global Intellectual Property Center, which estimates that 55.7 million jobs are created by IP. The paper challenges the evidence presented by these sources, and rebuts them with — to be blunt — a purely theoretical, evidence-free argument that:
Proponents of the IP-created-jobs argument also tend to underestimate the extent to which resources not spend on IP-protected products are spent elsewhere. Other issues aside, this means that stronger IP protection is more likely to change the distribution of employment than the overall number of jobs.
Anyone familiar with this strain of ultra-libertarian anti-IP argument soon learns that if he opposes it, he grapples with a cloud. What to make, for example, of the claim that people employed in IP-intensive industries would have other jobs if there were no IP? Of course, they probably would. People who currently work in the biotech industry would, instead, toil behind a plow or blacksmith’s forge, as their ancestors did not too long ago.
Or what of the claim that there are other means — prizes, philanthropy, or government funding — which also stimulate innovation? Of course they do, and no entrepreneur dependent on IP-protection denies others the right to compete for prizes or grants from philanthropies or government. These other means, however, simply do not provide adequate stimulus for innovation. That is the major reason for the Bayh-Dole Act of 1980, which extended IP-protection to innovation generated in government-funded labs. Before that law, very little government-funded science was finding its way into marketable products.
Perhaps the greatest fallacy in this paper (although not unique to this paper), is the notion that a patent creates a monopoly. Monopoly describes a market, not a process or product. If we look at the market for statins, for example, patent protection caused a number of entrants to launch statins — creating more choices for doctors and patients. Opponents of patens claim that patents increase the prices of goods higher than they would be without patents. They forget that the patented goods would not have been invented without patents.
Thankfully, the Mercatus Center’s scholars stop short of advocating repealing laws protecting IP. Unfortunately, in only critiquing others’ estimates of the benefits of IP, it misses an opportunity to propose improvements to current IP law.