Monday, September 11, 2006

The Limits of Intellectual Property

In an article titled Can Fashion Be Copyrighted? in today's Wall Street Journal, I learn:

prominent fashion designers in the U.S. are pushing for federal legislation that would offer three years of copyright-like protection for designs ranging from dresses and shoes to belts and eyeglass frames.
The designers' goal is to stop cheap imitations of their work.

The proposal raises an important question: To what degree should the government protect creative activity by awarding property rights to creators?

Most economists, I believe, agree with Paul Romer:

Perhaps the most important ideas of all are meta-ideas. These are ideas about how to support the production and transmission of other ideas. The British invented patents and copyrights in the seventeenth century. North Americans invented the agricultural extension service in the nineteenth century and peer-reviewed competitive grants for basic research in the twentieth century....[T]he country that takes the lead in the twenty-first century will be the one that implements an innovation that supports the production of commercially relevant ideas in the private sector.

According to this conventional view, patents and copyrights reward creative activity, promote growth, and enhance welfare, even at the cost of creating some temporary monopoly power.

Economists Michele Boldrin and David Levine, however, argue the opposite view in a forthcoming book Against Intellectual Monopoly:

It is common to argue that intellectual property in the form of copyright and patent is necessary for the innovation and creation of ideas and inventions such as machines, drugs, computer software, books, music, literature and movies. In fact intellectual property is not like ordinary property at all, but constitutes a government grant of a costly and dangerous private monopoly over ideas. We show through theory and example that intellectual monopoly is not necessary for innovation and as a practical matter is damaging to growth, prosperity and liberty.
When I was chatting with Michele about these ideas a few months back, I asked him if he would mind if I published their book, keeping the profits for myself. He demurred. Until the system is changed, he wants to keep the rights to his own intellectual property (but you can read the book for free online).

Beyond the question of whether intellectual property deserves legal protection, there is the question of which creations deserve protection and which should immediately enter the public domain. Should economist John Hicks get a royalty every time someone teaches the IS-LM model he developed? Presumably not. But drawing a bright line is not easy, as the fashion designers' proposal illustrates.