State of Innovation

A number of scholars[1] have suggested that the logical basis for property rights is scarcity.  Property rights efficiently allocate these resources and avoid conflicts.  These scholars argue that ideas and inventions are not subject to scarcity and therefore intellectual property rights should not exist.  These arguments seem to be particularly prevalent among Libertarians, including the Cato Institute and Von Mises Institute, and the open source community.  In this article we will examine whether there is a lack of scarcity in the creation of ideas.

Tangible property rights include real property rights in land and buildings and personal property rights in things like cars and furniture.  Tangible or physical property is scarce since it can only be owned by one person at a time and it takes resources to create.  Intangible or intellectual property such as patents and copyrights, and software in the case of the open source community, is not scarce according to this theory.  Multiple people may own intellectual property without excluding others from the property.  According to Tom G. Palmer a proponent of the scarcity theory of property:

It is this scarcity that gives rise to property rights. Intellectual property rights, however, do not rest on a natural scarcity of goods, but on an “artificial, self created scarcity.”[2]

Patents, one of the types of intellectual property rights, are based on creating new ideas or inventions.  The number of potential inventions appears to be almost limitless.  For instance, Paul Romer, a professor of economics at Stanford states:

On any conceivable horizon — I’ll say until about 5 billion years from now, when the sun explodes — we’re not going to run out of discoveries. Just ask how many things we could make by taking the elements from the periodic table and mixing them together. There’s a simple mathematical calculation: It’s 10 followed by 30 zeros. In contrast, 10 followed by 19 zeros is about how much time has elapsed since the universe was created.[3]

Someone might object that Paul Romer has overstated the number of possible chemical inventions, since not all elements are able to chemically bind to each other.  On the other hand, this calculation only includes one of each element.  Some of our most important chemical compounds contain long chains of carbon and silicon atoms.  In addition, the elements can bond to each other in multiple ways, ionic bonds, covalent bonds, polar covalent bonds and hydrogen bonds.  Elements may also have double, triple and quadruple bonds.  When you add in all these variations, Dr. Romer probably underestimated the number of possible chemical inventions.  This calculation is only for chemistry.  When you consider computer networks or electronic circuits with millions of transistors or nodes the number of different possible connection is n(n-1)/2 or easily equal to the number of combinations described for chemistry.  This does not begin to name all the possible number of inventions.  This would seem to argue for a lack of scarcity on the conception of ideas or inventions.

Although there are unlimited number of potential inventions, this does not mean that creating them is free.  The U.S. spends over $300 billion a year on research and development to discover inventions.[4] Either the U.S. government and numerous high technology companies are wasting a tremendous amount of money on a fraud, or the conception of inventions is subject to scarcity.  Just like real property conceiving inventions takes scarce resources.  The number of researchers, research facilities, and research equipment are all subject to scarcity.  Each researcher’s ability to pursue various inventions and discoveries is limited.  Clearly, the proponents of the scarcity theory of property are incorrect that the development of inventions and innovations is not subject scarcity.

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[1] Kinsella, Stephen, Against Intellectual Property and Palmer, Tom G., “Are Patents and Copyright Morally Justified? The Philosophy of Property Rights and Ideal Objects”, Harvard Journal of Law & Public Policy, Vol. 13, No. 3, Summer 1990, pp. 817- 865.

[2] Palmer, Tom G., “Are Patents and Copyright Morally Justified? The Philosophy of Property Rights and Ideal Objects”, Harvard Journal of Law & Public Policy, Vol. 13, No. 3, Summer 1990, p. 865.

[3] Bailey, Ronald, “Post-Scarcity Prophet: Economist Paul Romer on growth, technological change, and an unlimited human future”, Reason, December 2001.

[4] Kao, John, Innovation Nation: How America is losing its Innovation Edge, Why it Matter, and What We Can Do to Get it Back, Free Press, 2007, p. 39.