Posts Tagged ‘Ayn Rand’
The Supreme Court ruling in Mayo Collaborative Services v. Prometheus Labs., Inc. (Supreme Court 2012) was released on March 20, 2012 and they held unanimously against Prometheus and invalidated two patents under 35 USC 101. My title may be a bit salacious, since the holding in the case does not limit patents to just black magic, it limits them to magic. The holding on p. 4 states:
The steps in the claimed processes (apart from the natural laws themselves) involve well-understood, routine, conventional activity previously engaged in by researchers in the field. P. 4
And adds:
The three steps (of the claim) as an ordered combination adds nothing to the laws of nature that is not already present when the steps are considered separately. P. 10
Logically, the Supreme Court is saying that known steps or elements in combination with a law of nature is not patent eligible. First every invention ever made involves steps (elements) that were known individually before the invention, and laws of nature. You cannot create something out of nothing. Section 112 means that you have to be able to describe 
your invention in terms known to those skilled in the art. Thus the Supreme Court’s holding means that any invention that satisfies 112 is unpatentable under 101. The only inventions that will satisfy 101 are those that violate laws of nature or involve creating something out of nothing – or magic.
Get out your cauldrons-
For the lawyers in the audience this case reintroduces the point of novelty test nonsense.
I have written extensively about this case in the following posts and will not reiterate my earlier points.
Justice Breyer: Patent Ignorance
Mayo v. Prometheus – Supreme Court Grants Cert (Again)
But for those not familiar with the case here is a little background
The patents (6,355,623 and 6,680,302) claim methods for determining the optimal dosage of thiopurine drugs used to treat gastrointestinal and non-gastrointestinal autoimmune diseases. Thus, the questions in this case are whether determining optimal dosages of thiopurine drugs to treat autoimmune diseases exists in nature separate from man and whether this solves an objective problem? Clearly, determining optimal dosages does not exist in nature for any drug and the patent solves the objective problem of determining the optimal dosages of thiopurine drugs for autoimmune diseases.
Ayn Rand discussed this exact issue in Atlas Shrugged. James Taggart is discussing Rearden Metal with his wife:
”…’he didn’t invent smelting and chemistry and air compression. He couldn’t have invented HIS metal but for thousands and thousands of other people. HIS Metal! Why does he think it’s his? Why does he think it’s his invention? Everybody uses the work of everybody else. Nobody ever invents anything.’ (Jim Taggart) She(Jim Taggart’s Wife) said, puzzled, ‘But the iron ore and all those other things were there all the time. Why didn’t anybody else make that Metal, but Mr. Rearden did?’” Kindle Location 5796-5802
These exact questions could be asked of the Supreme Court. All these other steps were available to other people, but no one else discovered how to use thiopurine to safely treat Crohn’s disease. In fact, the Supreme Court admits as much.
. . . and it has been difficult for doctors to determine whether for a particular patient a given dose is too high, risking harmful side effects, or too low, and so likely ineffective. p. 4
The reality is that this Supreme Court is anti-patent and anti-property rights. The opinion states patents are monopolies in three spots and mentions rent seeking in one spot, but it does not mention that the Constitution clearly states that inventors have a RIGHT to their invention and it does not state that patents are property rights. This case is just another example that the anti-property rights and anti-Natural Rights crowd is in control of our government. This case will have long term negative ramifications for the US economy. The US is losing its technological advantage because it believes that inventors should work for free. Note that Singapore is taking another path and trying to figure out how to strengthen their patent laws (see Singapore and the US Divergent Patent Policies)
Perfect competition is when no one producer or consumer has the ability to affect the market price and all producers and consumers compete for a homogenous product, driving down the cost of the product. Under perfect competition, a producer’s profit is eliminated or at least reduced to a trivial return. Why this matters to patents is that the theory of perfect competition is often used to attack the patents. It is argued that patents allow producers a differentiating feature or product and therefore they have a greater margin than their competitors. Economists argue this means that the patent holder is getting monopoly profits according to the “perfect competition” theory and they call this profit a “deadweight” loss. This supposedly shows that resources are not being allocated efficiently.
So why do I say Perfect Competition is the equivalent of Altruism morally? Altruism is the idea of self sacrifice as a moral value and perfect competition is the economic idea of sacrificing a producer profits and a consumer’s right to choice. The goal of perfect competition is that no one, producer or consumer, is treated as an individual and everyone needs to be sacrificed to the altar of perfect competition collective. There is never any discussion of property rights with respect to “perfect competition” or individual rights.
Ayn Rand often stated that so called defenders of capitalism are often worse than its detractors. Perfect competition is another example of this. The Chicago School of economics, which included Milton Friedman, pushed the idea of “perfect competition.” The book of A Random Walk Down Wall Street was the application of perfect competition to Wall Street by a Chicago School of Economics professor. Perfect competition is the enemy of capitalism, individual rights, and economic growth.
Real per capita growth is the result of increases in one’s level of technology. Under perfect competition, there is no reason to invest in creating new technologies and in fact there is no reason to invest at all. Under perfect competition every investment yields the same low rate of return or no rate of return. Perfect competition is used to justify antitrust laws that destroy property rights and most importantly property rights in inventions. Perfect competition results in the same sort of idea of self sacrifice as altruism and is totally incompatible with capitalism, property rights, natural rights, and human happiness.
There has been a lot of confusion about Ayn Rand’s position on patents and intellectual property among her fans. I have written about this before in Ayn Rand on Intellectual Property. However, I thought it might be interesting to catalog every case where patents and inventions are mentioned in Atlas Shrugged for people researching this issue and to further illuminate Rand’s position on patents. The references are to the Kindle edition of Atlas Shrugged, which unfortunately has a large number of typos.
There are three main inventions in Atlas Shrugged, Rearden metal, the static electric motor, and the sonic destruction ray (aka Project X). The story is intimately woven around these three inventions.
Below are the quotes (bolded) and context where necessary with my commentary.
1) Location 5796-5802 ”…’he didn’t invent smelting and chemistry and air compression. He couldn’t have invented HIS metal but for thousands and thousands of other people. HIS Metal! Why does he think it’s his? Why does he think it’s his invention? Everybody uses the work of everybody else. Nobody ever invents anything.’ (Jim Taggart) She (Jim Taggart’s Wife) said, puzzled, ‘But the iron ore and all those other things were there all the time. Why didn’t anybody else make that Metal, but Mr. Rearden did?’”
Rand anticipates Open Source socialists. This idea that no one invents anything is the standard argument of collectivists, but it does not stand up to scrutiny. Why has inventing been concentrated in the last two centuries in relatively small populations of the U.S. and western countries?
2) James Taggart angry about Rearden’s success
location 5832- “‘…And Dr. Pritchett, the old fool, is going around saying that he knows Rearden didn’t invent that Metal- because he was told, by an unnamed reliable source, that Rearden stole the formula from a penniless inventor whom he murdered!”
This anticipates the defense of every infringer.
3) location 5808-5810 “I’m not sure it was so great-inventing this new Metal, when so many nations are in need of plain iron-why do you know the People’s State of China hasn’t even got enough nails to put wooden roofs over peoples’ heads?”
Fast track for green tech at the PTO – Why, except for politics, are so-called green tech inventions more important than other inventions?
4) location 5812-5822 “No sensitive person these days-when there’s so much suffering around us- would devote 10 years of his life to splashing about with a lot of trick metals. You think it’s great? Well, it’s not any kind of superior ability, but just a hide that you couldn’t pierce if you poured a ton of his own steel over his head! There are many people of much greater ability in the world, but you don’t read about them in headlines and you don’t run to gape at them at grade crossings-because they can’t invent non-collapsible bridges at a time when the suffering of mankind weighs on their spirit!”
5) location 5827 “The country gave Rearden that Metal, now we expect him to give the country something in return.”
Dr. Ferris, State Science Institute response on the Bill Directive 10-289
6) location7042-7046 ” ‘Did you hire any research men of your own?’ ‘ Yes, yes, some- but let me tell you, I didn’t have much money to spend on such things as laboratories, when I never had enough funds to give me a breathing spell. I couldn’t even pay the bills I owed for the absolutely essential modernizing and redecorating which I had to do- that factory was disgracefully old-fashioned from the standpoint of human efficiency…’”
Lee Hunsaker, owner of 20th Century Motor Co. after a lawsuit forced Midas Mulligan to sell, and then Mulligan Galted
Our accounting rules don’t value inventions. No accounting system shows any return for an invention. I and other have written about how our accounting rules inhibits investment in the inventing process. See Accounting Inhibits R&D http://hallingblog.com/accounting-inhibits-rd/
7) location 7111 “Our aim was not to produce gadgets, but to do good.”
Sounds like President Obama or President Bush’s 1000 points of light.
location 7126 ” Don’t you know any words but ‘engineer’?”
Ivy Starnes, sister of Gerald Starnes, last owners of 20th Century Motors, on their “great plan” to change the factory that caused its failure and response to Dagny’s urgency for the names of the engineers working on the revolutionary motor
Do we value our engineers? Sales people and marketing managers are compensated more than corporate inventors/engineers. Perhaps this is related to our dysfunctional accounting systems.
9) location 7300-7302 “‘The secret you are trying to solve involves something greater-much greater-than the invention of a motor run by atmospheric electricity. There is only one helpful suggestion that I can give you: By the essence and nature of existence, contradictions cannot exist.’”
Dr. Akston, professor of philosophy, speaking to Dagny about why people have Galted
10) location 196 “Anyway, this should be my lead for the character of John Galt. He, too, is a combination of an abstract philosopher and a practical inventor; the thinker and the man of action together…”
Ayn Rand, forward to Atlas Shrugged
Iillustrating the fallacy of the “tinker-er, mad professor/inventor”
11) Location 152-154 “ [ Galt represents]…For Dagny, the ideal. The answer to her two quests: the man of genius…is expressed in the search for the inventor of the engine.”
Forward to Atlas Shrugged
12) Location 3758- 3763 “He [Rearden] had devised a new type of truss. It had never been made before and could not be made except with members that had the strength and lightness of Rearden Metal. ‘Hank,’ she [Dagny] asked, ‘did you invent this in two days?’ ‘Hell, no. I “invented” it long before I had Rearden Metal. I figured it out while making steel for bridges. I wanted a metal with which one would be able to do this, among other things.’”
Dagny asking Hank about the invention of his new bridge truss
An illustration of advanced inventing: what could I do if… I have written on this process before, see How to Build a Patent Portfolio that Dominates Your Market Place http://hallingblog.com/how-to-build-a-patent-portfolio-that-dominates-your-marketplace/
Evolutionary vs. revolutionary technologies: how one invention opens up myriad new inventions. This passage illustrates that each invention can open up the possibility of more inventions and there is no finite number of inventions to be created.
13) Location 6377 Hank and Dagny find motor
14) Location 7777-7780 “’ A man with the genius of a great scientist, who chose to be a commercial inventor? I find it outrageous. He wanted a motor, and he quietly performed a major revolution in the science of energy, just as a means to an end, and he didn’t bother to publish his findings, but went right on making his motor. He did he want to waste his mind on practical appliances?’ ‘Perhaps because he liked living on this earth,’ she [Dagny] said involuntarily.”
Dr. Stadler speaking with Dagny
France vs England at the beginning of Industrial Rev. France was just as advanced in science, if not more so, however, their scientists didn’t work on practical applications or with practical inventors. Only those admitted to the French Academy of Sciences were considered worthy – there was a stiff hierarchy. In England, practical inventors interfaced with the scientific community aided by a patent law that did not care (as much) if the inventor came from the Academic Community. For more information see The Most Powerful Idea in the World http://www.amazon.com/Most-Powerful-Idea-World-Invention/dp/1400067057.
15) Location 8968-8972 “Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of fools?…Money rests on the axiom that every man is the owner of his mind and his effort…”
Francisco d’Anconia response to Money is the root of all evil
Anticipating the absurd arguments of Von Mises economists who want to use the inventions without paying the creator
Man’s mind is the key factor in production for humankind
15) Location11722- 11724 “Point Three. All patents and copyrights pertaining to any devices, inventions, formulas, processes and works of any nature whatsoever, shall be turned over to the nation as a patriotic emergency gift by means of gift certificates to be signed voluntarily by the owners of such patents…the Unification Board shall then license the use of such patents and copyrights to all applicants, equally and without discrimination, for the purpose of eliminating monopolistic practices…”
Directive 10-289
Rand anticipated the nonsense of considering patents a monopoly.
This anticipates the actions of the Bush administration’s response to the anthrax scare: threatening a drug company to lower their prices on the antidote, or they would compulsory allow other companies to manufacture
It also anticipates Obama proposal to reduce the length of pharma’s patents to 7 years
And anticipates Liberals demanding that the drug companies reduce their costs for elderly, poor, and 3rd world. Most countries already have made use of these compulsory measures, which leads to higher costs in the US where the inventions originate.
This illustrates people’s lack of understanding about the importance of property rights
16) location 11729 “Point Four. No new devices, inventions, products, or goods of any nature whatsoever, not now on the market, shall be produced, invented, manufactured or sold after the date of this directive. The Office of Patents and Copyrights is hereby suspended.”
Sounds like the failure to fully fund the PTO and
Dudas’ irrational rationing of issuances of new patents
17) Location 11765 “A man’s brain is a social product. A sum of the influences that he’s picked up from those around him. Nobody invents anything, he merely reflects what’s floating in the social atmosphere…”
Dr. Ferris’s view there is no such thing as genius
Of course this begs the question, why are the majority of inventors in this world concentrated in so few countries?
18) Location 11817 “ We won’t have to worry about new inventions upsetting the market”
Explains why large multi-nationals want to pass the America invents act- to stifle disruptive competition
19) 11839 “There’s been enough invented already-enough for everyone’s comfort-why should they be allowed to go on inventing?”
You are either moving forward or moving backwards. You cannot remain static. The reason why is in post Sustainability isn’t Sustainable http://hallingblog.com/sustainability-isn%E2%80%99t-sustainable/.
20) location13028 “…the boy had cared for nothing but his studies, not for sports or parties or girls, only for the vision of the things he was going to create as an inventor.”
Young genius commits suicide on eve of passage of Directive 10-289
21) Loc 11880 “…Taking over the patents is fine. Nobody’s going to defend industrialists. But I’m worried about taking over the copyrights. That’s going to antagonize the intellectuals. It’s dangerous. It’s a spiritual issue…”
Lawson responding to Mouch on impact of Directive
See the Copyright Term extension Act vs. America Invents Act- We are constantly weakening patent rights on one hand and strengthening copyrights.
This anticipates that Congress is always concerned about artists but could care less about inventors
22) loc 15001”… Dwight Sanders? Where was the inventor of her motor?”
23) loc 15237 “…in whose arms? ‘ why the inventor of the motor.’ She gasped, closing her eyes; this was one connection she knew she should have made.”
24) Loc 15318 “The young inventor of the 20th century motor company is the one real version of the legend, isn’t it?”
Dagny on crashing into Galt Gulch
25) Loc 15587 “…I ask less of the men to whom I trade it for the things I need. I add an extra span of time to their lives with every gallon of my oil that they burn. And since they’re men like me, they keep inventing faster ways ways to make the things they make- so every one of them grants me an added minute, hour, or day with the bread I buy from them, with the clothes, the lumber, the metal…”
Wyatt on living in the Galt Gulch
This is a response to the whining about paying inventors or their patents stifling competition is nonsense, unless you want something for nothing
26) Loc 15777 “she was looking at the inventor of the motor, but what she saw was the easy, casual figure of a workman in his natural setting and function…”
Dagny observing Galt at work in the Gulch
27) Loc15989 “…no more than we consume for our immediate needs-with not a penny nor an inventive thought left over to harm the world. It is evil to succeed, since success is made by the strong at the expense of the weak?”
Galt explaining to Dagny why they are on strike
28) Loc 16896 “that sacred fire which is said to burn within musicians and poets-what do they suppose moves an industrialist to defy the whole world for the sake of his new metal, the inventors of the airplane, the builders of railroads, the discoverers of new germs or new continents have done through all the ages?”
This demonstrates the absurd argument that artists are creative but inventors and scientists aren’t creative
29) Loc 17033 “…john intended to be an inventor, which meant that he was to be a physicist…”
Dr. Akston on the three brilliant students
30) Loc 17709 “…fraudulently solemn voice magnified by the microphone inventor’s ingenuity into the sound and power of a giant…”
Mouch getting ready to announce Directive 10-289.
31) Loc17745 “…Project X would not have been possible, this great invention will henceforth be known as the Thompson Harmonizer!”
32) Loc 17785 “..who invented that ghastly thing?”
Dr. Stadler talking to Dr. Ferris about the Thompson Harmonizer (Sonic Destruction Ray aka Project X)
33) Loc 17791 “’ what is the practical purpose of this invention? What are the ‘epoch-making possibilities’? ‘Oh, but don’t you see? It is an invaluable instrument of public security. No enemy would attack the possessor of such a weapon.”
Stadler asking Ferris about Project X, realizing it was his research that led to the invention
34) Loc17819 “…voice galloping across the continent with a description of the new invention…”
Dr. Ferris on Project X
35) Loc 17828 “This great invention was the product of the genius of a man whose devotion to the cause of humanity is not to be questioned…”
Wesley Mouch discussing Project X.
36 Loc 17836 “…the new invention was an instrument of social welfare, which guaranteed general prosperity… this invention, the product of dr. Robert Stadler…”
Announcer to the world on project x
37) Loc 17852 “…if people should misunderstand the nature of the new invention, they’re liable to vent their rage on all scientists. Scientists have never been popular with the masses.”
Dr. Ferris talking about Project X
38) Loc 17853 “…this invention is a great, new instrument of peace…”
More on Project X
39) Loc 17875 “ Dr. Stadler could not believe it at first-that the new invention was to be greeted with particular gratitude by the mothers of the country.”
More on Project X
40) Loc 17956 “…fraudulent voices talking about some sort of new invention that was to bring some undefined benefits to some undefined public’s welfare.”
Dagny overhearing the broadcast
41) Loc 18603 “…he is the man who invented the motor we found…”
Dagny telling Hank that John Galt exists
42) Loc 19113 “wondering whether some invention of his own, some device of rays and lenses, permitted him to observe her every movement…”
Dagny wondering how Galt has followed her progress the past 10 years
43) Loc 19403 “They were both performing an expected routine, a routine invented by someone and imposed upon them, performing it in mockery, in hatred, in defiling parody on its inventors.”
Taggert with Lillian Rearden
44) Loc 20698 “…while you were combing the country for the inventor of my motor…”
Galt explaining to Dagny that he was working as a lineman for Taggert Transcontinental all this time
45) Loc 21962 “that the alleged short-cut to knowledge, which is faith, is only a short-circuit destroying the mind-that the acceptance of a mystical invention is a wish for the annihilation of existence and, properly, annihilates one’s consciousness.”
Galt radio speech
46) Loc 22391 “…you would not be able to fulfill or even to conceive your wishes. You would not be able to desire the clothes that had not been made, the automobile that had not been invented, the money that had not been devised…”
Galt radio speech
47) Loc 22396 “just as your mystics of spirit invented their heaven in the image of our earth, omitting our existence, and promised you rewards…”
Galt radio speech
48) Loc 22454 “physical objects cannot act without causes. That his organs of perception are physical and have no volition, no power to invent or to distort, that the evidence they give him is an absolute, but that his mind must learn to understand it…”
Galt radio speech
49) Loc 22495 “a student reading a book understands it through a process of-blank-out. A scientist working on an invention is engaged in the activity of-blank-out.” [how most teachers explain the world]
Blank-out is Rand’s way of showing that people refuse to acknowledge the process of reason, of thinking
50) Loc22577 “You who have never grasped the nature of evil, you who describe them as ‘misguided idealists’-may the God you invented forgive you!”
Galt radio speech
51) Loc 22594 “…when I worked in your world, I was an inventor. I was one of a profession that came last in human history and will be first to vanish on the way back to the sub-human. An inventor is a man who asks ‘Why?’ of the universe and lets nothing stand between the answer and his mind.”
It is interesting that Rand points out that being an “inventor” was one of the last professions in human history. Perhaps the first person to take on the profession of a being an inventor was Galileo, who lived in Venice. Venice passed the first modern patent laws in 1474. The U.S. has been the preeminent producer of people who made their living as inventors. The America Invents Act is another step along the path of ensuring that no one will make a living as an inventor in the U.S. anymore.
In fact, whenever you see great periods of prosperity, you see large numbers of new inventions. Whenever you see a lack of inventors inventing, you can be assured we are stagnating economically
52) Loc 22621 “…whether you would be able to invent a wheel, a lever, an induction coil, a generator, an electric tube,-then decide whether men of ability are exploiters who live by the fruit of YOUR labor…”
Galt radio speech
53) Loc 22631 “…dream of enslaving the material providers who are scientists, inventors, industrialists…”
Galt radio speech
54) Loc 22644 “…and to exile from the human race the hero, the thinker, the producer, the inventor…”
Galt radio speech
55) Loc 22875 “you failed to recognize the motor I invented-and it became, in your world, a pile of dead scrap.”
Shows nations and people are wealthy because of their mind-embodied by their inventions and technology-not their natural resources, labor and land.
56) Loc 22947 “…Nor will he give ten years of unswerving devotion to the task of inventing a new product… they will seize his rewards and his invention”
Galt radio speech
57) Loc 22958 “…for the work of the inventor who created the product which you spend your time on making, for the work of the scientist who discovered the laws that went into the making of that product…”
Galt radio speech
58) Loc 22974 “in proportion to the mental energy he spent, the man who creates a new invention receives but a small percentage of his value in terms of material payment, no matter what fortune he makes, no matter what millions he earns. But the man who works as a janitor in the factory producing the invention, receives an enormous payment in proportion to the mental effort that his job requires of him.”
Hear, Hear
59) Loc 23002 “…they deliver their science to the service of death, to the only practical purpose it can ever have for looters: to inventing weapons of coercion and destruction.”
This is not about self-defense, it is about the policies we pursue that force us to spend so much time and talent and money on defense
60) loc 24304 “I’m Robert Stadler- he had thought-it’s my property, it came from my discoveries, they said it was I who invented it…”
Stadler on seizing Project X under his control and rule the country
61) Loc 24400 “’I invented it! I created it! I made it possible!’ ‘You did? Well, many thanks, but we don’t need you any longer. We’ve got our own mechanics.’ ‘Have you any idea what I had to know in order to make it possible? You couldn’t think of a single tube of it! Not a single bolt!’…’What claim do you have to it?’ Meigs patted his holster. ‘This.’”
Was Midas Mulligan, the hero banker in Atlas Shrugged, running a fractional reserve bank? There has been much criticism of the Federal Reserves’ handling of our money supply and its effect on the economy. Much of this criticism has been led by Ron Paul and the Austrian school of economics. Some critics, including Ron Paul and Thomas E. Woods, author of Meltdown, have further argued that fractional reserve banking should be outlawed. Fractional reserve banking is how all modern banks (since at least 1750s) operate. Wikipedia defines a Fractional-reserve banking as a type of banking whereby the bank does not retain all of a customer’s deposits within the bank. Funds received by the bank are generally on-loan to other customers. This means that available funds (called bank reserves) are only a fraction (called the reserve ratio) of the quantity of deposits at the bank. As most bank deposits are treated as money in their own right, fractional reserve banking increases the money supply, and banks are said to create money.
Ayn Rand clearly would have been against the Federal Reserve system, which her protégé Alan Greenspan headed for over a decade. The Federal Reserve is a government institution that prints money at will and manipulate the money supply for the benefit of government looters and Wall Street looters. In Atlas Shrugged, Rand rails against paper money and in Galt’s Gulch they use gold for their currency. However, to the best of my knowledge she never addressed the issue of fractional reserve banking directly. The history of fractional reserve banking starts with the concept of an exchange bank. I explain in my book, The Decline and Fall of the America Entrepreneur: How Little Known Laws and Regulations are Killing Innovation:
Modern banking started in the early 1600s with the Bank of Amsterdam. Merchants could deposit coins with the Bank of Amsterdam and use this account to pay for transactions. Using checks, a merchant’s account was debited and another merchant’s account was credited. This meant that coins did not have to be transported from one merchant to another with the attendant risk of theft and loss or the cost of transportation. The Bank of Amsterdam was just an exchange bank that facilitated transactions between merchants. Next came the Swedish Riksbank established in 1656. The Riksbank was not only an exchange bank, it also lent money making it the first modern fractional reserve bank. Fractional reserve banking is the banking practice in which banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder, while maintaining the simultaneous obligation to redeem all these deposits upon demand. Commonly, loans are made against collateral such as land or jewelry. … Some people believe fractional reserve banking creates money out of thin air, but what really happens was the money for these loans were backed by some collateral other than coins or bullion. The downside of other types of collateral is they are not as liquid as species (coins, bullion). As a result, if large numbers of customers of a fractional reserve bank wanted species (currency) at the same time, the bank would not able to fulfill all its customer’s demands. This is a classic run on a bank. A run on a bank is a cash flow issue. A sound bank may have plenty of collateral and performing loans, but if most of its customers demand species at the same time it will not be able to fulfill these requests. Fractional reserve banks free up capital from low performing assets so that they can be invested in higher performing assets. For example, if you owned a large tract of ranching land that was not highly profitable but represented a large amount of capital and you want to invest in an oil well, without fractional reserve banking you would have to sell some of the land in order to invest. With fractional reserve banking you could convert your land into a generally accepted form of money, by pledging your land as collateral to a bank for a loan. In the modern world, the loan to you is just a computer entry in your bank account.
It is clear from history that fractional reserve banks are not some sort of government institution, like the Federal Reserve. Rand’s philosophy was that people are free to contract with each other for anything that does not involve fraud or the use of force. A fractional reserve bank meets this requirement, with the one possible caveat that a bank should disclose this information to depositors so that the customer understands and assents to the use of his money this way. Since most people do not know what a fractional reserve bank is, including many bank employees, I am not sure that this caveat is met. I assume that when you open a new account banks provide you with information that they are a fractional reserve bank, but I have not been able to prove this. Without fractional reserve banking it is would be very difficult to securitize (Collateralize) many assets, such as houses and land. This would significantly impede the economic growth of a country.
The Ayn Rand Institute held a lecture on intellectual property (IP). The talk was given by Adam Mossoff a law professor at George Mason University School of Law. There are eight parts to the lecture. I provide a short synopsis/comment about each video with a link below in case you want to skip to a particular section of the talk. I have previously written on Ayn Rand’s views of intellectual property, see Ayn Rand on Intellectual Property. My post is more about the issues of patent law, while this lecture is more about how IP is the most fundamental of all property rights.
Part 1 of 8: Introduction
This part is a general discussion of the state of the economy and how Ayn Rand’s ideas apply. Mossoff argues that intellectual property has risen to prominence and discusses all the new advances in technology that are based on IP. He explains that Leftists and Libertarians have joined in an all out attack on IP, particularly patents. He also argues that “Net Neutrality” is an attack on IP. He notes that recent Supreme Court cases have significantly weakened patent rights. He concludes with the idea that all property is really intellectual property.
Part 2 of 8: All Property is Fundamentally Intellectual Property
From this point forward the lecture focuses on patents and inventions. Ayn Rand stated that patents are the heart and core of property rights. The talk is about the moral justification for IP. All property is based on two concepts: 1) the nature of value, and 2) man as a rational animal and his mind is his basic tool of survival. It is only life that makes the concept of value possible. Unlike other animals, man has to first determine what values are necessary to sustain his life using his mind.
Professor Mossoff seems to be making an argument that all products/services we use are/were inventions (products of the human mind). They may have been invented a long time ago, but they do not exist in nature (separate from man) and therefore they had to be invented by man before they could be produced. He then points out that human needs do result in the creation of products/services to fill those needs. First, the solution to the need has to be invented and produced and only then can the need be satisfied.
The birth of Industrial Revolution corresponds with the creation of property rights in inventions, i.e., patents. I make this point in my post, Source of Economic Growth.
Part 3 of 8: The Industrial Revolution
The Industrial Revolution was an explosion of inventions that occured when patents were created. Daniel Webster argued that an invention is the product of the inventor’s mind and he has more rights to his invention than any other property. Mossoff quotes a US judge in the 1800s who states that patents are a natural right. Mossoff argues that theUSpatent system (first modern patent system) was the key reason theUSsurpassedEnglandas the driving force of the Industrial Revolution. This explosion of inventive and economic activity in theUSamazed Europeans.
Ayn Rand in Atlas Shrugged refers to machines as the frozen form ingenuity.
Mossoff states that Jeremy Bentham’s ideas are at the root of Libertarian’s attack on IP. Bentham basic philosophy was Utilitarianism – the greatest good for the greatest number. Bentham stated that the reason for property rights was because of scarcity and conflict resolution not natural rights. Mossoff then points out that the followers of Bentham then argue that there is no conflict between people using the same ideas like there is with land. Ideas can be copied and used endlessly. This argument fails for two reasons. One, there is not conflict between ideas, but there is a conflict when a physical embodiment of the idea (invention) is created. They the copier has clearly limited the return for the inventor. Second, a specific purpose of patent laws is to spread the knowledge behind the invention so that other inventors can take advantage of this knowledge – so patents do not limit access to knowledge they increase it. I discuss the fallacies behind the scarcity theory of property at my post Scarcity: Does it Prove Intellectual Property is Unjustified and Scarcity -2 and Scarcity -3. Mossoff points out that this is the philosophical point of view used by the Cato Institute and the Von Mises Institute to attack patents (IP).
Utilitarianism’s “greatest good for the greatest number” always leads to totalitarianism. It also never leads to the purported goal. The reason for this is that utilitarianism is merely a justification for short term actions. Once something has been produced, it always looks like the greatest good is to redistribute the creation. However, this is clearly only true in the short term. In the long term it is clear that this always destroys the economy. This is the theory behind theUSSR,North Korea, and all socialist states. As Ayn Rand pointed out you only need open your eyes to see that these countries do not produce the greatest good for the greatest number. This is because stealing the product of one’s mind (mental labor is labor) is no different than banning free speech. It stifles the mind, which source of all economic progress (values).
Part 4 of 8: Libertarians Assume Resources
Mossoff shows that Libertarians ignores the creation of these inventions. They just assume they exist. The Leftists version of this in theUSis the statement “theUSis the wealthiest Nation in the World” and therefore we should be able to afford X (national health care, social security, free education, fill in the blank). Both groups ignore how and why these resources were created.
Libertarians deny the very foundation of all property rights in their attacks on IP – the rational mind. Libertarians embrace the anti-mind collectivist premises that Leftist use to attack all property rights. I made the same point in my book The Decline and Fall of the American Entrepreneur.
Part 5 of 8: Why the Utilitarian Defense of IP Fails
Mossoff points to the ACLU v. Myriad, see my post ACLU – Gene Patent Non-Sense.
Value creation is the source of property rights according to Ayn Rand. Mossoff states that it is no coincidence thatRandin Atlas Shrugged had the state nationalize all patents in the infamous Directive 10-289. It was because patents are the most fundamental of all property rights. Man’s mind is the root of all material value ever produced in the world.
Mossoff argues that Locke’s labor theory of property is incorrect. He argues that Locke was specifically talking about physical labor. Note it takes calories and effort to perform mental labor, so the distinction between physical labor and mental labor is not that one involves the physical transform of the world. (A similar point seems lost on computer programmers). I would argue that Locke never intended labor to mean “physical labor” but productive effort in modern terms. However, Locke also never clearly defined that all material values comes from the mind.
Part 6 of 8: Question -1
The question is from a teacher at theHenryGeorgeSchoolwho suggests that Kilby and Noyce’s decision to resolve the interference (who owns the patent) to the integrated circuit by not pursuing a patent resulted in faster development of the IC. Mossoff points out that this is fallacy. First, other people would have been inspired to design around the patents or license them and there is no evidence that the development of the IC would have been slowed down. (Most patent attorneys will tell you that there has never been a patent that cannot be designed around eventually) Second, the macroeconomic evidence shows that countries with weak patents are slow to adopt new technologies. Third, Mossoff points to the Bayh–Dole Act, which was enacted because federally funded research was not being commercialized. The reason it was not being commercialized was that the ownership rights were uncertain. This is a typical tragedy of the commons problem. Fourth, Mossoff points out that when the uncertainty about the ability to patent genetically modified life forms was removed in theUSthe biotech industry took off. Biotech languished inEuropefor another decade because of their resistance to recognize patent rights in genetically modified organisms.
The questioner clearly did not listen to a single thing that was being said during the lecture.
Part 7 of 8: Question – 2 & 3
Another question from a teacher at theHenryGeorgeSchool. He suggest that land is special. He argues that the value of land is often enhanced by what is done around your parcel of land and has nothing to do the owner’s labor. As a result, he argues that people should pay “society” a rent for the use of the land. The questioner is confusing externalities with property rights. Externalities and spillover benefits have been used over and over by socialists to justify stealing from producers for the socialists pet projects. The questioner also confuses luck with property rights. Just because someone is lucky and becomes wealthy does not justify stealing from them.
Mossoff points out that land has value because people used their mind to create value from land. Land has no inherent value.
The next questioner asks about multiple people who contribute to the invention of a chair. In patent law this is why patent are a right to exclude, not the right to make something. This ensures that all contributors have rights to the invention. If we did not have a right to exclude, then the final inventor (or first inventor) would be the only one who would receive an economic return.
Part 8 of 8: Question – 4 . . .
Is IP enforcement of copyrights censorship? Mossoff points out that if a Leftist comes into your house and spouts off socialist nonsense it is not a violation of their free speech rights to force them to either leave or shut up. The right to free speech does not give you the right to use someone else’s property. The government’s enforcement of your property rights is not a violation of the 1st Amendment because you do not have a right to free speech while on or using someone else’s property. Milton Freedman showed that free speech is actually impossible without property rights.
Another question suggests that IP slows down the adoption of new technologies. There is absolutely no statistically valid evidence for this point of view. There are anecdotal stories of this happening, but the actual evidence is that countries with weak patent rights have slower adoption rates of new technologies not vice versa.
I just saw the movie Atlas Shrugged, based on Ayn Rand’s book with the same title. The movie has divided the book into three parts and this was the first of the three parts. I thought the movie did a very good job and stayed true to the book. I purposely did not re-read the book before I saw the movie. Like almost any movie, the book is better than movie. The way the characters looked in the readers’ mind are never the way they look in the movie. My wife thought the acting was just okay, but it did not detract from value of the movie. The theater I saw the movie in was about 75% full (mid day) and there was a hearty round of applause at the end. As you would expect, some of the speeches and characters will immediately strike you as being based on people in today’s news. For instance, Wesley Mouch looks like and talks like a Barney Frank. The speeches about “shared sacrifice” sound like our communist president’s (Obama) speech on the 
budget, April, 14, 2011. Rand’s rational selfishness and the absurdity of altruism are as clearly delineated, as in the book. The movie ends with a very dramatic scene, providing a good ending point, and whetting the appetite for Part II.
One thing that struck me was how the State Science Institute’s propaganda against Rearden Metal is almost exactly like the Global Warming debate today. While the Luddite attitude toward genetically modified food might seem like a better analogy, it does not have the same political dynamics – at least not yet. The scientist, Dr. Robert Stadler, justifies his unscientific position (lying) because it is necessary in order for the State Science Institute to continue to receive government funding. I remember that when I read this passage in the book 25 or so years ago, I was reluctant to accept that science could be perverted by politics. However, the last 25 years have provided me with numerous examples where so called “science” is really propaganda- funding from the federal government to ensure that the organization continues to receive funding from their political masters. For instance, the manipulation of data by Climate Change advocates to ignore the medieval ice age (little ice age) among numerous other lies. This is just one of many examples where these so called scientists ignore or manipulate the data to fit their conclusions. This is not science, it is propaganda. Note both sides of the political spectrum behave in this moral depraved activity – see Creationism. Not surprisingly, the religious right was no more a fan of Ayn Rand than the religious left.
If you approach this movie as a separate artistic piece from the book you will find it highly entertaining and enlightening. I hope that people in their 20s and 30s can transcend the focus on industrial technologies opposed to the information age.
You will love this movie if you understand the value of freedom and reason. If you are an intellectual or economic leech, you will hate this movie.
Ayn Rand’s ground breaking novel Atlas Shrugged has been made into a movie. The movie is tackling the book in three parts. The first part 
opens on April 15th – how appropriate. Click here for a voice mail from Francisco d’Anconia.
A number of movie theaters appear to be boycotting the movie. If you want to demand that they bring the movie to your town click here.
Ayn Rand stated in, Capitalism: The Unknown Ideal, that
Political economy was, in effect, a science starting in midstream‘
Economics has ignored the unique features of its principle resource – Man.[1] We are going to avoid that problem, by first examining the unique nature of homo sapiens. But before we look into the unique nature of man, let’s examine what it means to be a science. It is my 
premise that economics is objective and therefore can be a hard science[2], based on empirical observation, logic, and reason. There are some who would say that economics cannot be a hard science because we cannot setup isolated experiments to test hypotheses. However, the same can be said of geology and astronomy, both of which are considered hard sciences.
All science is based on certain fundamental empirical observations. One of these fundamental observations is that reality is objective. This means that reality exists independent of any person’s belief, hope, faith, or desire. The evidence for this proposition is overwhelming and includes all the incredible advances in physics, chemistry, biology, geology and the applied sciences (engineering).
Fundamental Observation: Reality is Objective[3]
Ayn Rand would state this fundamental observation as:
Reality exists as an objective absolute—facts are facts, independent of man’s feelings, wishes, hopes or fears.[4]
The second fundamental observation of science is that reality is understandable or discoverable using observation, logic, and reason. In science, we follow logic and reason even if it seems counterintuitive. For instance, the implications of special and general relativity predict that clocks on GPS (Global Position Satellites) satellites will run at a different rate than clocks on earth.[5] This appears counterintuitive, but empirical evidence shows that this is true and failure to account for this difference will result in meaningful navigational errors.
Fundamental Observation: Reality is understandable or discoverable using observation, logic, and reason
Ayn Rand would state this fundamental observation as:
Reason (the faculty which identifies and integrates the material provided by man’s senses) is man’s only means of perceiving reality, his only source of knowledge, his only guide to action, and his basic means of survival.[6]
If economics is going to be a science, it must be based on these two fundamental observations/assumptions. Some people may object that science is based on observations. All logical systems are based on either observations or assumptions. For instance, Euclidean geometry is based on the assumption that a line goes on forever and two parallel lines never intersect. Spherical geometry is not based on these assumptions. It assumes that a line will wrap around on itself. In science we do not arbitrarily pick the starting point, we use observations.
Definition: Economics is the study of how man transforms things to meet their needs.
Keeping Rand’s admonishment about the state of economics in mind, we now turn our attention the unique nature of man. Aristotle and Rand define man as a rational animal. The genus is animal. The unique nature of animals and all life is that it thrives on negative entropy.[7] The species in the definition of man is that he is rational. In the context of economics, the important part of being rational is that man invents. No other animal invents. In Atlas Shrugged invention plays a major role in the story. The major character John Galt is an inventor as is Hank Reardon.
Man’s unique reward, however, is that while animals survive by adjusting themselves to their background, man survives by adjusting his background to himself.[8]
The first need of every person is to stay alive. This means that life is a fight against entropy, the second law of thermodynamics. Entropy is normally defined as the measure of the disorder of a system. Entropy was discovered as part of thermodynamics and it explains that a perpetual motion machine is impossible. Entropy always increases in a closed system. Luckily for us, the Earth is not a closed system. For instance, we receive energy from the Sun. The only way to increase order is by the input of energy. Life represents increasing order and therefore just to sustain life at its present level requires energy. Edwin Schrödinger, Nobel Prize winning physicists, proposed this idea in his 1944 book, What is Life.[9]
Fundamental Observation: Life is a fight against entropy
Plants create this energy by photosynthesis. They convert carbon dioxide into sugars (energy) using light. They use this energy to create order. Animals eat plants or other animals and use the energy to create order. Note that when animals eat plants or other animals, they are increasing the disorder of the plants and animals they eat. Thus, there are two general mechanisms that increase the entropy of life forms, 1) internal and 2) external. Internal mechanisms are those that result from the failure to consume enough calories (energy) and aging. Animals require oxygen, water, and food in that order to survive.[10] Without oxygen, the animal cannot oxidize enough sugar (fat, protein) to survive – overcome entropy. Without water, the animal’s cells are unable to absorb energy and expel wastes.[11] As a result, the animal does not receive sufficient energy to overcome entropy. Aging is a process of increasing disorder – entropy. This disorder is caused at least in part by disorder in genetic information.[12] External mechanisms include being eaten or attacked by other living organisms, diseases, accidents (for animals), and the elements.
In general, living organisms use energy to overcome entropy first and then to increase their size. However, some animals also create simple shelters or seek shelter to ward off the entropy increasing effects of the elements and predators. Rain, sun, hail, snow, heat, and cold all contribute to the increase in entropy of living organisms (disorder). A living organism dies when its entropy increases above a certain level. Life has two main methods of overcoming the effects of the second law of thermodynamics: 1) food (energy) consumption and 2) shelter creation (inhabitation).
A species of life becomes extinct when the species as a whole reaches a certain level of entropy either because it cannot consume enough energy or because external mechanisms increase its entropy to the extinction level. A species reaches the Malthusian Trap when increases in population of the species results in the total required energy (food) to support the population is greater than supply of food. Or stated in the laws of physics, the total available energy is less than the energy required to overcome the total entropy of the species’ population. Most life forms exist in the Malthusian Trap, including humans until the Industrial Revolution. Evolution is life’s way of determining which species is best at overcoming entropy.
Homo sapiens also consume food and create shelter to overcome the effects of entropy. Unlike other living organisms, homo sapiens organize their environment to minimize the effects of entropy. For instance, humans have invented agriculture to increase their supply of food (energy) and therefore order. Humans also harnessed the physical strength of animals, created internal combustion machines, electric lights, electricity, washing machines, tractors, computers, the internet, email, lasers, fiber optics, etc. All of these are inventions. Humans alter their environment by creating inventions. This is different from every other animal. This should not be surprising, since the distinguishing characteristic of homo sapiens is their ability to reason. Man is a rational animal according to Aristotle’s classical definition.[13] Being rational is the distinguishing characteristic of humans. Man uses his reason to alter his environment (invent) and increase order for himself. Invention is the unique way in which man is able to create order – this is the fundamental observation of economics.
Fundamental Observation of Economics: Man’s unique ability to increase order (wealth) is his ability to invent.
Ayn Rand’s way of explaining this is:
Nothing can raise a country’s productivity except technology[14]
Inventing first results in the increased success of the species. Homo sapiens populated most of the world in less than 500,000 years because of this unique ability. As long as the rate of technological progress is slower than the growth in population, man is stuck in the Malthusian Trap. Sometime around 1800 in Europe and the United States, the rate of invention exceeded the rate of growth in population and man escaped the Malthusian Trap at least in the West.[15] When man escapes, he is no longer subject to biological evolution. As far as we know, homo sapiens are the only species to ever escape the Malthusian Trap.
Trade enhances man’s ability to invent. By trading the products of each others’ inventions both trading partners can specialize and end up wealthier. David Ricardo explained how both parties are better off because of trade using the example of England trading cloth for Portuguese wine:
England may be so circumstanced, that to produce the cloth may require the labour of 100 men for one year; and if she attempted to make the wine, it might require the labour of 120 men for the same time. England would therefore find it in her interest to import wine, and to purchase it by the exportation of cloth. To produce the wine in Portugal, might require only the labour of 80 men for one year, and to produce the cloth in the same country, might require the labour of 90 men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced with less labour than in England.[16]
Using the example above, if England produces twice as much cloth as it needs, it has invested 200 man hours. If Portugal produces twice as much wine as it needs it has invested 160 man hours. Now if England and Portugal trade their excess cloth for the excess wine, England has invested 200 man hours for all its cloth and wine, while Portugal has invested 160 man hours for all its cloth and wine.[17] If England had produced both all its cloth and all its wine locally, then it would have invested 220 man hours for the same goods. This means that England requires 10% more man hours if it does not trade. If Portugal had produced both all its cloth and all its wine locally, then it would have invested 170 man hours for the same goods. This means that Portugal requires 6.25% more man hours if it does not trade.
Trade is a rational activity and humans are the only animals to engage in trade of non-like items and trade between non-related individuals.[18] Classical economics has focused on trade and the related supply and demand curves instead of the role of invention in economics. This might have occurred because the beginning of classical economics was in reaction to the Mercantile system and its limitations on trade. Adam Smith’s book, The Wealth of Nations, is often seen as a refutation of the Mercantile system. Matt Ridley, in his book, The Rational Optimist, has suggested that trade is the key to creating wealth. This emphasis on trade has been misplaced. Invention proceeds trade. If everyone produces the same thing, then there is no reason to trade. It is only because someone has invented a new product that trade becomes a rational choice. For instance, one group of people may have invented a process for skinning animals and using them as clothing. They may have traded this with people who had access to flint and invented a system for making simple axes. Invention has to proceed production, which has to proceed trade logically. Of course, without trade the value of invention is severely diminished.
In summary, life is a fight against entropy. Economics is the study of how man transforms things to meet their needs. The unique way in which humans meet their needs is to invent. Only by inventing can humans increase their level of wealth.
[1] Rand, Ayn, Capitalism: The Unknown Ideal, Kindle Edition, location 126-128, 2011.
[2] Hard sciences include physics, chemistry, and biology, as opposed to “soft science”, such as psychology, sociology, and political science.
[3] Even the bizarre results of quantum mechanics are repeatable and independent of the observer’s hopes, desires, faith, opinion.
[4] The Ayn Rand Institute, Introducing Objectivism, http://www.aynrand.org/site/PageServer?pagename=objectivism_intro, 2/0/11.
[5] Real-World Relativity: The GPS Navigation System, http://www.astronomy.ohio-state.edu/~pogge/Ast162/Unit5/gps.html, October 3, 2010.
[6] The Ayn Rand Institute, Introducing Objectivism, http://www.aynrand.org/site/PageServer?pagename=objectivism_intro, 2/0/11.
[7] Wikipedia, What is Life?, http://en.wikipedia.org/wiki/What_is_Life%3F_(Schrödinger), Edwin Schrödinger, 10/6/10
[8] Rand, Ayn, For the New Intellectual, p. 15.
[9] Wikipedia, What is Life?, http://en.wikipedia.org/wiki/What_is_Life%3F_(Schrödinger), 10/6/10.
[10] There are few exotic life forms that do not need oxygen, but all require energy to overcome entropy.
[11] BNET, Physiological Effects of Dehydration: Cure Pain and Prevent Cancer, http://findarticles.com/p/articles/mi_m0ISW/is_2001_August/ai_78177228/, 10/6/10.
[12] Hayflick, Leonard, Entropy Explains Aging, Genetic Determinism Explains Longevity, and Undefined Terminology Explains Misunderstanding Both, PLoS Genetics, http://www.plosgenetics.org/article/info:doi/10.1371/journal.pgen.0030220, 10/7/10.
[13] The Philosophy of Aristotle, Adventures in Philosophy http://radicalacademy.com/philaristotle4.htm, 10/7/10.
[14] “The Moratorium on Brains” The Ayn Rand Letter, I, 3, 5.
[15] This should more accurately be stated that the rate of growth in productivity due to the introduction of new technologies exceeded the rate of growth in population.
[16] Ridley, Matt, The Rational Optimist: How Prosperity Evolves, Harper Collins, New York, 2010, p. 75.
[17] This example ignores the cost of transport the wine and cloth, but it illustrates the general concept.
[18] Ridley, Matt, The Rational Optimist: How Prosperity Evolves, Harper Collins, New York, 2010, p. 56.
A fundamental difference between religion and science is that a scientific theory is testable, while a religion is not. Religion ignores facts and believes in faith. All environmental doomsday theories are religions, not science. This is true no matter how much they disguise their religion with scientific jargon or call what they are doing a science.
Before I examine some of these environmental doomsday theories, let’s look at another pseudo science. Creationists say creationism is a science and they attempt to include scientific jargon, including their attempt to show probabilistically human life is impossible. One version of this idea is that given the number of base pairs in the human genome and that even if one of them were wrong humans would not exist, it is therefore impossible that their was not a Devine hand. Of course, it turned out that much of the genetic material is irrelevant and that there are redundancies in the encoding of the human genome. Did the Creationist admit defeat? No, because it’s a religion not a science. The same is true of Global Warming (Climate Change), Global Cooling, Malthus, Club of Rome Limits of Growth, Population Bomb, Nuclear Winter, etc. None of these hypothesis are testable. The proponents cannot name a single test that would prove their hypothesis incorrect.
Limits of Growth
In this post, I will only discuss the ideas related to some limit to human prosperity. The idea that humans are doomed to starve to death was first proposed by Thomas Malthus in 1798. Human population was about 1 billion when Malthus wrote this and today we have a population of about 7 billion. In 1800 a much larger percentage of people were at risk of starving to death than today. Nevertheless this did not stop Paul Ehrlich from writing The Population Bomb in 1968 warning of mass starvation in 1970s and 1980s. When Erhlich wrote The Population Bomb the world had population of about 3.5 billion. Of course, Ehrlich turned out to be wrong, just as Malthus had. Note that Mr. Ehrlich also believed we faced imminent Global Cooling at the time, now he is apostle for Global Warming. How many times can a person be wrong? Has Ehrlich admitted that his earlier hypothesizes were clearly incorrect? No. Have the mass starvation proponents admitted their ideas are incorrect? No, because their theories are not science they are a religion. No facts will convince them to give up their irrational argument that we are about to run out of food. See Earth Economist: The food bubble is about to burst. The argument in this article is that we are about to run out of water for agriculture. This is nonsense. The amount of water on the Earth is essentially the same as it was a billion years ago. Water has never been where we want it or necessarily in the form we want it. This is not a resource problem, this is an infrastructure/invention problem.
Club of Rome
This was a book commissioned by the Club of Rome. The Club of Rome is a think tank and the book “Limits of Growth” was published in 1972 and based its predictions on a computer model. This model did not include the Internet, Personal Computers, email, genetic engineering, heart transplants, etc. The model did not include the single way that humans increase wealth – inventions (new technologies). The book was widely criticized by people such as Robert Solow, Nobel Prize economist, as having a weak base of data. The book has recently been updated. I bet it still does not take inventions into account. The Club of Rome’s prophecies have been no better than Paul Ehrlich. Is there any fact that if true would prove this hypothesis wrong? No, because this is a religion not science
All these doomsday prophecies are religions.
Limiting Freedom
All these proposals demand that human freedom be limited to deal with these doomsday religious theories. This makes them somewhat self-fulfilling prophecies. The way human’s create wealth is by the use of their mind and the ability to act on their thoughts. Or as Ayn Rand said in Capitalism” The Unknown Ideal, “reason is man’s means of survival. Limiting freedom, limits the ability of people to create wealth. For more information see Sustainability isn’t Sustainable.
While Ronald Reagan pandered to the religious right, he still nailed this issue.
Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefiting from their success — only then can societies remain economically alive, dynamic, progressive, and free. Trust the people.
From President Bush’s 1000 points of light to President Obama’s biblical argument “aren’t we our brother’s keeper?” for government charity programs it appears everyone agrees that charity is good for our country and may even strengthen our economy. We are bombarded with the message that “we must give back to our community.” This discussion even spilled over to Bill O’Reilly and Stephen Colbert where they both agreed that charity was good but disagreed on the extent and implementation of charity.
First, let’s examine the logic of the “give back” mantra. In order to give something back you must have taken something. If you live in a free and just society the only people who can “give back” are those people who are thieves. The statement is complete nonsense, meant to associate anyone who is successful financially with thieves morally.
Yes, but we don’t want to see our fellow human beings dying in the street for lack of food do we? About 200 years ago humans in the Western world first escaped the Malthusian Trap. The Malthusian Trap is when humans are like every other animal, their population expands until they are on the edge of starvation. This means that until 200 years ago some people did starve to death and it was a real threat for all but the wealthiest people. This could not have been solved by using charity to redistribute food to those people starving. There just was not enough food for all the people on Earth. Even today there are parts of the World where people starve to death. This problem will never be solved by charity. While there may be enough food to feed all the people on Earth today, the problem is purposeful manipulation of food supplies in countries for political purposes.
People did not escape the Malthusian Trap because of charity. The only reason people escaped the Malthusian Trap is because we increased our level of technology. The only way to increase our level of technology is by inventing and then disseminating these invention. This occurs when we have strong property rights, particularly for inventions (patents), and free markets. Why don’t we celebrate people and companies that create and disseminating new technologies instead of charity? If you truly want to help the “poor,” then you should support free markets and strong property rights, particularly for inventions. For more information see Source of Economic Growth.
Charity takes (gives) money from a productive person and gives it to someone who has not produced anything. Since everyone has to consume to live, charity results in a decrease in total wealth. In addition, the money given to charity is not given (spent) on someone who is productive. If you really wanted to maximize the “pay it forward” value of your charity, you would give it to the person who was most likely to do the most good with it. This means you would give it to a person who is productive, which is what generally happens in a free market.
When people donate their time to charities it also destroys wealth. When engineers, lawyers, architects, doctors, etc spend time preparing meals or hammering nails, they are trading time worth $100-$1000 per hour for labor worth $10 per hour. This does not help the poor, it just reduces the total wealth created.
Does charity have any value? I have been both the recipient of charity and have given charity over the years. I am appreciative of the charity I have received and have no regrets about the charity I have given. Charity is like manners. It makes civil society more pleasant, when it is private charity. Government charity is not charity it is theft. Even when there is too much private charity it is destructive. How much is too much charity? When more than 10% of the people in a country receive charity it is too much. I remember a United Way pitch I was forced to sit through where they said 40% of the people in our area benefited from the charities the United Way supported. If that was the case, why didn’t we just pay for these things directly rather than paying United Way to take a cut and redistribute our money?
Here is what Ayn Rand had to say about charity.
My views on charity are very simple. I do not consider it a major virtue and, above all, I do not consider it a moral duty. There is nothing wrong in helping other people, if and when they are worthy of the help and you can afford to help them. I regard charity as a marginal issue. What I am fighting is the idea that charity is a moral duty and a primary virtue. (emphasis added)
“Playboy’s Interview with Ayn Rand,” March 1964.
Note that Ayn Rand believes that charity requires judgment, specifically the judgment of whether the recipient is worth of help and the giver can afford the expense.
People who push charity as a moral issue are immoral and are not helping the “poor.”
There seems to be a lot of confusion about Ayn Rand’s position on intellectual property both by her supporters and her detractors. For instance, the Cato Institute considers it almost a prerequisite to have read Atlas Shrugged to work there. However their position on patents and copyrights is in direct contradiction to Ayn Rand’s position.
The following quote from Atlas Shrugged, should give you a hint at Ayn Rand’s position on intellectual property:
“Man’s mind is his basic tool of survival. Life is given to him, survival is not. His body is given to him, its sustenance is not. His mind is given to him, its content is not. To remain alive he must act and before he can act he must know the nature and purpose of his action. He cannot obtain his food without knowledge of food and of the way to obtain it. He cannot dig a ditch––or build a cyclotron––without a knowledge of his aim and the means to achieve it. To remain alive, he must think.” Rand 1992, p. 1012.
Ayn Rand devotes a whole chapter, Chapter 11, in Capitalism: The Unknown Ideal to patents and copyrights. The first sentence makes her position crystal clear. “Patents and copyrights are the legal implementation of the base of all property rights: a man’s right to the product of his mind.”[1] “What the patent and copyright laws acknowledge is the paramount role of mental effort in the production of material values: these laws protect the mind’s contribution in its purest form: the origination of an idea.”[2]
After pointing out that intellectual property is the source of all property rights, she clarifies the distinction between the idea and the physical embodiment. “What the patent or copyright protects is not the physical object as such, but the idea that embodies it. By forbidding an unauthorized reproduction of the object, the law declares, in effect, that the physical labor of copying is not the source of the object’s value, that the value is created by the originator of the idea.”[3] “Thus the law establishes the property right of the mind to that which it has brought into existence.”[4] She then points out that “patents and copyrights only pertain to the practical application of knowledge, to the creation of a specific object which did not exist in nature.”[5]
Next, she tackles the whole question of whether a patent is privilege (in the modern sense of a gift)[6] or is a right. According to Rand, the government does not grant a patent, in the sense of a gift, privilege of favor, but recognizes the originator of the idea and protects their rights in the idea.[7]
Rand has a very interesting take on the reason for limited terms of patents and copyrights. She analogies a patent or copyright to a debt owed to the inventor/author by people that copy the inventor’s invention or author’s book. Debts are not and cannot be perpetual, so this is why the term of patents and copyrights are limited according to Rand. I will note that real property rights are actually time limited also. A person only has a property right in real (personal) property during their lifetime. How can someone who is not alive own something – this would be a logical absurdity. However, real property is passed on to the person with the next best title to real property upon a person’s death. In the case of intellectual property, no one person has better title to intellectual property than anyone else so upon the expiration of its term it becomes free for all mankind to use. Or as Rand explains, real property “can be left to heirs, but it cannot remain in their effortless possession in perpetuity: the heirs can consume it or must earn its continued possession by their own productive effort.”[8] In contrast, “Intellectual property cannot be consumed. If it were held in perpetuity, it would lead to the opposite of the very principle on which it is based: it would lead, not to the earned reward of achievement, but to the unearned support of parasitism.”[9]
Rand seems to anticipate the patent thicket discussion and suggests that this is the reason for shorter terms of patents than copyrights.[10] She also suggests that it is very difficult to correctly define the limits of a patent boundary.[11] Here, she is mistaken. There is no evidence of a patent thicket ever existing on a macroeconomic level, only evidence of people who do not want to compensate an inventor for using their technology. The boundaries of patents are no more difficult to define than those of copyrights or land before GPS and title insurance. However, patents will be more useful as the equivalent of title insurance for invention is created.
I will end this post with a particularly prescient quote from Rand:
Today, patents are the special target of the collectivists’ attacks . . .[12]
[1] Rand, Ayn, Capitalism: The Unknown Ideal, Signet, New York, 1967, p. 130.
[2] Id.
[3] Id.
[4] Id.
[5] Ibid. p. 131.
[6] See Adam Mossoff’s excellent paper “Who Cares What Thomas Jefferson Thought About Patents?
Reevaluating the Patent “Privilege”, where he points out that historically a privilege is a right that can only be secured in society, essentially synonymous with what we would call a “civil right” today. http://www.pff.org/issues-pubs/ip/bulletins/bulletin2.2jeffersonprivilege.pdf
[7] Rand, Ayn, Capitalism: The Unknown Ideal, Signet, New York, 1967, p. 131.
[8] Ibid. p. 131
[9] Ibid. p. 131
[10]Ibid. p. 133
[11]Ibid. p. 133
[12]Ibid. p. 133
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