Paradoxes of Intellectual Property

Economic theorists have often expressed doubts as to the extent of property rights beyond the material sphere. Their views are generally embedded within an analytical framework whose primary objective is to identify the prerequisites for co-ordination through exchange and/or division of labour. Adam Smith associates the 'nature and causes' of the wealth of nations with division of labour among individuals or social groups (Smith, 1776). Property rights in general are not in the foreground of his analysis of the routes taken by the division of labour and the extent of the market in improving the productivity of labour through social co-ordination. In addition to that, Smith is at the origin of a long tradition in economic theorizing according to which it is possible to distinguish between productive and unproductive labour, where productive labour is only that particular type of activity that may lead to accumulation of capital (and thereby expands the productive capacity of the economic system). It may be surprising to see that property rights are not central even to the classical analyses of exchange and resource allocation. The reason is simply that economists have traditionally been interested in the advantages associated with the transaction of resources , that is, with the transfer of 'utilization rights' from one economic agent to another. In the economic analysis of exchange, the emphasis is upon utilization rights (such as rights to exclusive consumption), whereas other aspects of property (such as its contribution to the formation of wealth and the accumulation of capital) are not in the foreground . To sum up, economically relevant co-ordination is associated either with division of labour (production of resources through co-operation), or with exchange (transfer of utilization rights over an existing set of resources from one individual, or social group, to another). In either case, the economist has traditionally been interested in co-ordination and its consequences (upon productive effectiveness, social utility, and so on) whereas the institutional prerequisites of that co-ordination have seldom been in the foreground. However, and precisely because of this intellectual situation, economic theory may suggest a set of standards, admittedly abstract but useful in assessing the individual or collective advantages of alternative regimes of property rights (such as private property, social property, or 'mutual' property ). The structure of this paper is as follows. Section 2 outlines a general framework in which the advantages of co-ordination may be assessed independently of specific property regimes. Section 3 introduces property rights institutions and discusses some of their implications. Section 4 examines the characteristics of ideas as economic goods and addresses in particular the contribution of ideas to the core economic issue of co-ordination through division of labour or exchange. Section 5 concludes the paper with a discussion of alternative regimes of intellectual property.