State of Innovation

Patents and Innovation Economics

Scarcity – Does it Prove Intellectual Property is Unjustified?

A number of scholars[1] have suggested that the logical basis for tangible property rights is scarcity.  Property rights efficiently allocate these resources and avoid conflicts between competing rights of individuals.  These scholars argue that ideas and invention 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. 

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.  Intangible property can be owned by multiple people without excluding others from the same 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]

Scarcity is not the historical or logical basis of private property rights.  The historical justification of property rights are based on the right that a person owns himself.  If you do not own yourself, you are a slave.  If you own yourself then you own the fruits of your labor, physical and mental.  This is commonly referred to the “natural rights labor theory of property.”

In the pre-capitalist eras, private property existed de facto, but not de jure, i.e., by custom and sufferance, not by right or by law.  In law and in principle, all property belonged to the head of the tribe, the king, and was held only by his permission, which could be revoked at any time, at his pleasure.  (The king could and did expropriate the estates of recalcitrant noblemen throughout the course of Europe’s history.)[3]

The labor theory of property provided the foundation of property rights as opposed to property as a custom.  As a result, the scholars who suggest that property rights are based on scarcity are incorrect historically.

Despite this historical inaccuracy, perhaps “scarcity” is a better theoretical framework for the justification of property rights.  The natural rights labor theory of property explains why slavery is immoral.  If you own yourself, then no one else has the right to own you.  It also explains why murder and manslaughter are immoral, why stealing is immoral, why assault and battery are immoral and why we have laws against all these actions.  The natural rights labor theory defines how property should be allocated and how people come into possession of property morally and legally.  The labor theory explains all of our basic criminal law and all of our basic property laws.  What does scarcity explain?  It offers no justification for why slavery, murder, manslaughter, assault and batter and theft are immoral, except that they are inefficient at allocating resources.  Thus, all of these crimes would be allowed if they were efficient at allocating resources.  Scarcity does not explain who has ownership in property or why they should have ownership in property.  It merely explains that private property ownership is an efficient manner in allocating scarce resources.

In science, the theory that has the greatest ability to explain the widest number of facts is considered to be the correct or better theory.  Here the “scarcity” theory of private property requires the additional assumption that it is preferable to have efficient allocation of resources.  However, it fails to explain how the resource should be initially distributed, it does not explain how property law determines ownership and has no power to explain criminal law.  Trading scarcity for the labor theory of property is like trading the theory that “what goes up must come down” for Newton’s Law of gravity.  The fact of the matter is that the proponents of scarcity have confused cause with effect.  A system of private property results in efficient allocation of resource, but it is not the reason for private property – it is the effect of private property.

[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] Rand, Ayn, Capitalism the Unknown Ideal, The New American Library, 1962, p. 13.


June 22, 2009 - Posted by | -Law, -Philosophy, Innovation, Patents | , , , , , , , , ,


  1. Pretty nice post. I just came by your blog and wanted to say
    that I have really liked browsing your posts. In any case
    I’ll be subscribing to your feed and I hope you post again soon!

    Comment by Mary | June 23, 2009 | Reply

  2. Well the problem here is that we have property rights in tangible commodities. You cannot say for certainty that property rights came into existence through the right of man to own himself and his labor OR through the scarcity theory.

    If you look at a primitive men when they first discovered agriculture and they settled down then do you really think when one man took the wheat of another man(the first case of theft), the man who was robbed really made a hue and cry about being devoid of his natural rights of ownership of his labor, or did he make a case on the grounds that if the thief takes what he grew then he will be devoid of enjoying that property.

    In fact once the idea was well accepted that property rights must be respected otherwise the owner of a property will not be able to enjoy its fruits, it can be easily seen that the idea became accepted that a man owns his body and the fruits of his labor. He owns it because otherwise he wouldn’t be able to enjoy the fruits of his labor.

    On the other hand the idea that in our society we just thought of ‘natural rights of owning your labor’ sounds quite weird(unless you can put them in a better way).

    And I always ask the question, would you support property rights if there were no tangible commodities in this world(if we could just copy food from each other), would you still support a framework where a man could exclude others from enjoying his labor? Would you really support creation of scarcity for the sake of labor rights where there exists none?

    Comment by Renegade Division | August 25, 2009 | Reply

  3. The point is that scarcity does exists in the creation and distribution of ideas (inventions). So IP law is not creating scarcity. The creation of ideas takes research facilities, researchers, research equipment, etc. all of which are subject to scarcity. If there were no cost associated with the distribution of ideas, then we would not need teachers, professors, doctors, lawyers, engineers. You pose a false choice. If we could reshape reality so there was no scarcity of food or other goods, then no one would want to impose a false scarcity. But both tangible and intangible property is subject to scarcity.

    Comment by dbhalling | August 25, 2009 | Reply

  4. You made some good points there. I did a search on the topic and found most people will agree with your blog.

    Comment by Anonymous | September 7, 2009 | Reply

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