State of Innovation

Patents and Innovation Economics

Hayek vs. Rand: Patents and Capitalism

David Kelley gave a talk on Ayn Rand vs. Friedrich Hayek On Abstraction.  (If you want to read Mr. Kelly’s paper on point click here)  This is a very important talk and explains the difference between Austrian economists and free market (objectivists).  It also helps explain why Austrian economists who say they are for free markets are against patents, which are property rights in one’s invention.

Ultimately, Hayek is a warmed over Platonist.  According to Hayek our perception and reason are limited (Plato).  It is this limit to reason that is Hayek’s justification for a free market.  Basically, Hayek argues that because our reason is limited it is sheer folly to suggest that central planning can ever work.  Rand on the other hand sees no limit to reason and notes that reason is man’s basic tool of survival.  But each man must reason for them self.  To force (central planning) someone to do something against their reason is immoral and eliminates the creativity and ingeniousness of everyone subject to the central planning decree.  This means we have a small group of people attempting to “solve” problems instead of many people and the people making the decision are not the ones that feel it’s effects.  As a result, central planning is an open loop process, which as any engineer knows is a very inaccurate process.  In addition, central planning does not take all the variables into account, since only each individual can know exactly what their circumstances and needs are.

I believe Austrians gravitate to Hayek’s ideas because it saves religion (Christianity) from reason and the free market.  Hayek’s ideas on the limits of reason puts him in the company of Kant, Hume and Plato.  Hayek in that sense is both anti-reason and anti-science, which leaves plenty of room for religion.

It also explains why Austrians do not understand patents.  Property rights to Austrians are based on social convention or utilitarianism but not based on reason.  According to the Austrians we have property rights (privileges, arbitrary grants) because of tradition or because they believe (not know – reason is limited) it results in the best use of resources.  As Hakek states:

[M]orals, including, especially, our institutions of property, freedom and justice, are not a creation of man‘s reason but a distinct second endowment conferred on him by cultural evolution.

Patents were once characterized as monopolies (see English history), so Austrians cannot reason out the difference between what were called patents before the Statute of Monopolies and what are patents today.  For Rand, creation is the basis of property rights and all human creations start with one man’s mind.  Because of this Rand made it clear patents/copyright (Intellectual property) are the basis of all property rights.

For more see Defending Capitalism: Ayn Rand vs. Hayek


More specifically on Hayek’s concept of Abstraction:

If Hayek’s ideas had any validity, then a person whose eyesight was restored after being blind from birth could immediately (visually) identify an apple or red, which we know is not true.  If Hayek’s ideas were true then we would have to have some inherent understanding of the double slit experiment in quantum mechanics or the idea that time slows down as we approach the speed of light, but this is clearly nonsense.


May 2, 2013 Posted by | -Economics, -Philosophy, Patents | , , , | 19 Comments