I’ve given several speeches about intellectual property (IP).1 Tonight I’ll take a somewhat different approach to the subject. Let me ask you a general question. Why are you here at this great (government) school? It’s to have fun, right? But it is also to learn; that is the basic purpose of education: to learn. To be sure, we learn things all the time. A university is a more formalized way of learning, but learning as a general matter is very important. This may sound like a trite observation. We make these comments all the time: “Education is important. Learning is good.”
The Role of Learning and Knowledge in Human Action
But this leads me to the focus of my talk, which is about learning and the importance of information and knowledge, and copying and emulation on the market and in life in general. So let’s think about how learning is important and how it’s used in everyday life.
Ludwig von Mises, the famous Austrian economist, the father of modern Austrian economics, systematized the study of human action and gave it a name: praxeology. This is the study of the logic of human action. Mises analyzes action in very simple, elementary terms. He breaks it down. I want you to think about it. If you haven’t heard of praxeology, don’t be daunted by the expression. The idea is to look at what the components of human action are; what we do every day, all the time.2
The Structure of Human Action: Means and Ends
When a human acts, what is he doing? He looks around the world. He chooses an end or a goal that he wants to achieve, some purpose of his, something he wants to happen, something that would not happen without his active intervention in the world. So he chooses one action over another. He chooses his highest value action or end, and demonstrates this preference by his action.
So we have a chosen end, or goal. But how does an actor achieve the goal he has chosen? He has to select certain means. This is what Mises and the Austrians call means: things that are physically efficacious, things that let you causally interfere in the world to achieve some desired goal.
Let’s take an example. You’re all eating now so let’s take a food example. Let’s say you’re hungry. So you say, “I know I like cake. I know I like chocolate cake. I think I’ll try to acquire a chocolate cake.”
You can see right off the bat that knowledge has entered the picture; the knowledge of what you like. Maybe you’ve learned this from experience, but knowledge is already playing a role in your decisions and actions. It has informed your choice of ends.
So how do you achieve your end? How do you get the chocolate cake? Well, you might obtain a recipe for cake and get the ingredients and tools to make the cake: mixing bowl, eggs, flour, spoon, kitchen, oven. Then you spend some time and effort and make a cake. You make that cake instead of watching television or getting your car washed or changing your clothes or making a vanilla cake.
This illustrates that human action is the purposeful use of means to achieve a desired end or result.3 Notice that the means you employ have to be physical or scarce resources, things that are real things in the world, things that you can affect, like the mixing bowl and the oven.4 This is what you employ to achieve your goal. The Austrians, especially Mises, go into the logical structure of human action, which we just discussed, and show that it implies so many things.5 For example, it implies opportunity cost. You choose this goal instead of the other ends. The things that you did not choose are the opportunity cost of your action.
Action also presupposes causality. You have to believe there is a way to achieve your result by manipulating the world in accordance with time-invariant causal laws. The structure of human action also has the concept of profit and loss built in, which is not only a monetary concept, but a psychic concept. Not psychic in the Shirley MacLaine sense, but psychic in the sense of pertaining to mental phenomenon, such as value and ends. For example, if you achieve your goal, which is to obtain a nice chocolate cake, and if it is as you envisioned it, and if you enjoyed it like you expected that you would, then you’ve achieved a profit. If it turns out to be a failure or you don’t enjoy it for some reason, then there is a loss.6
Knowledge as a Guide to Action
Where does this leave the role of learning? Learning is important because it is how we acquire information. Information is important because it gives us knowledge of how the world is. The more knowledge you have, the wider is your universe of choices. You have more ends to choose from, for example.7
Let’s say one person only knows the possibility of making a vanilla cake or a chocolate cake. If he learns that it’s possible to make a coconut cake, now he can choose between three possible goals. So his knowledge of the ends can expand and give him a wider array of choices.
Importantly, you also have to have knowledge of means and causal laws of the world because this informs your choice of means. To be able to choose a given end, you also need to know how to achieve it. You need to have a recipe.8 I don’t mean only food recipes. A recipe in this sense is just a general way to do something by exploiting resources in the world to achieve some end.
You know, for example, that if you take an egg, some flour, and chocolate, mix them in a certain way, and bake it, then, after a while, you have something that is edible. So the role of knowledge in action is to guide action. It is not the means of action. For example, you might know five different ways of getting the cake you desire. One may be to steal the cake. It’s immoral, but it’s a possible way. One may be to bake the cake. Another may be to purchase the cake. Yet another is to hire someone to bake the cake for you. So, in other words, the more knowledge you have, the wider the universe of ends and means that you have to draw on. This is the reason why learning is good.
Consider the great creators in the past — Shakespeare, Michelangelo, Bach, say — they drew upon knowledge that they acquired from the culture they were born into. Even the greatest of inventors, innovators, and creators didn’t think of everything on their own.
Scarcity, the Free Market, and Abundance
Now, let’s think about the role of scarcity in the free market. Given the above-mentioned understanding of what human action is, this very simple structural view of human action — that we use knowledge to guide our choices of ends and of what means to use to achieve the chosen ends — what is the role of external resources? That is, external objects, scarce things in the world? The role of these things is to be used by men to achieve their ends. Knowledge guides your action. It helps you choose what you want to do.
So reflect on the purpose of the free market system. What is its purpose, its role? What is its function or result? It is to help us achieve abundance. We live in a world of scarcity. We don’t live in the Garden of Eden.9 We live in a world where survival is not easy. It’s difficult. We have to find ways to survive because there is scarcity. There aren’t bananas hanging from every tree, enough for everyone to survive off of, but the free market operates to unleash creative energy and to allow tremendous productivity.
If you think about it, although we have scarcity and there is nothing we can do about this fundamental fact of the universe, the free market, in a way, helps us fight and overcome this situation.10 The thing is, the only way you can do this is by having a free market. A free market has to be built on private property principles. The reason we have to have private property is because these things are scarce. Economists call them rivalrous because you can have rivalry or fighting over them. For example, for a productive use to be made of the spoon, in the cake example, someone has to own the spoon. Someone has to be the one person who has the right to control that spoon. How do other people know that a given resource is owned, and who owns it? Property rights set up objective borders. They tell you who owns things. They’re visible and observable.11
This doesn’t mean there is no crime. This doesn’t mean that everybody respects these property rights. There can be thieves, but at least with thieves we can theoretically deal with them with crime prevention techniques. Paraphrasing Hans-Herman Hoppe, thieves and criminals are just a technical problem.12 People who want to live in harmony and use these resources productively have to have a system of property rights to allocate the use of the spoon.
Sometimes it’s said that libertarians believe in property rights and that other political systems do not uphold property rights. This is true in a sense, if you mean property rights in a particular way, but if by “property rights” you mean the right to control a scarce resource, which is what property — ownership — is,13 then every system on the face of the earth upholds some form of property rights. Every system on the earth will have a legal rule that says who is the owner of this platform, who is the owner of that factory, who is the owner of your paycheck.
For example, in the modern quasi-socialist welfare state that we live in today, the ownership rule is that the government owns about half of my paycheck. It’s clear there are property rights. It’s just that I only have about half and the government has the other half.
So in every society the legal system assigns an owner to a given contestable resource. What’s unique about libertarianism is not that we believe in property rights; everyone does. Rather, it’s our particular property rights scheme, which is basically the spinning out of the Lockean idea that the person who owns a given contested resource is the first user of it, or someone that he sold or gave the property to. The purpose of property rights is to permit us to peacefully, productively, and cooperatively use these things that are, unfortunately, scarce and cannot be used by more than one person at a time.14
Cooperation, Emulation, and Competition
I don’t know if all of you have heard of the Misesian “calculation argument,” but in the 1920s, Ludwig von Mises published a seminal paper that explained why socialism cannot work, why economics is literally impossible under full-fledged socialism.15 The reason is there is no way to compare competing projects unless you can do so in cardinal, numerical terms. It’s a very simple idea. You can’t compare building a bridge to planting an orchard. They’re not comparable units. Mises realized that in a free market system with money prices, everything resolves in terms of money. You can compare with money prices. The problem in socialism is you don’t have real money prices. You don’t have real money prices because there is no private property in the means of production. This is the basic insight of Mises as to exactly why a private property system permits the free market to be prosperous and to generate wealth and to fight this condition of scarcity.
The market is producing more things all the time. It doesn’t ever eliminate scarcity, but it fights it. If we had the government off of our backs, you could probably buy a Mercedes for $500. You could buy a microwave oven for a penny. It would not be infinitely plentiful, but it would be so plentiful everyone could have what they wanted.16
What are the key elements of a free market economy that allow this to happen? One is cooperation. The free market, by setting up property borders, allows people to cooperate instead of fighting over a resource.
It also gives rise to competition. My friend Jeff Tucker, of the Mises Institute, related to me a really good formulation of what competition is that was given to him by Larry Reed who is now the president of FEE, the Foundation for Economic Education. Reed’s formulation is “competition is the striving for excellence in the service of others.” That’s true. That’s what it is. You try to constantly improve what you’re making to try to please the customer. This gives rise to a relentless effort on the part of the people in the market to lower cost, to make things more efficiently, to serve customers the best you can because you’re in competition with others.
But we’ve left out one thing. Remember we talked about human action. A key aspect of human action is knowledge. You have to have knowledge to guide your actions. So how does this relate to the market? What’s the role of knowledge in human action, in the market context? It’s emulation.17 If you see someone successful in the market, you emulate them. This is how competition arises. You see someone attracting customers. Let’s say some guy invents a slushee stand and he’s getting a lot of customers. You might build your own slushee stand to compete with him. You copied his idea. So what? Customers are better off. Now the original guy might improve his slushee stand. He might offer more flavors.
This relentless striving to please the customer benefits everyone. This is the process of the market and it presupposes the idea of copying information, learning information, emulating. Competition means you can compete with someone, but you have to respect their property rights. You cannot trespass against them. You can’t steal your competition’s property, but you can “steal” their customers because they don’t own their customers.
Let’s tie this back to the structure of human action. Remember, we said human action uses means and it is guided by knowledge. So the means of action need to be privately owned only because they’re scarce. That’s why we have to have property in those things. Now, you can’t say scarcity is a bad thing, as it’s part of the nature of reality, but it’s definitely a challenge. We humans have to try to overcome scarcity. The free market allows us to create wealth.
Creation of Wealth versus Creation of Property
Now, I want you to think about this for a second. What does it mean to create wealth? Does it mean to actually create an object out of thin air? No. It means to make things that you own more valuable. That increases wealth.18
Imagine two people engaging in a simple exchange. I give you my goat and you give me some eggs from your chickens. Was anything physically created? No. There was just an exchange. But as we know from very basic Austrian economics that one transaction increased the sum total of wealth in society because I wouldn’t have given you my goat if I didn’t want the eggs more. So after the exchange, I’m better off and the same thing for the other guy.19
So just by allowing people freedom and respecting property rights, you can increase wealth, but the key thing to recognize is that wealth is not an object. Value is not a substance. Things are more valuable because they’re in a different shape. They’re more valuable to customers, for example. When we talk about creating wealth, what we mean is we are rearranging things that we already own, rearranging scarce resources to make them more valuable to customers or to yourself.
So, yes, you use your creativity, you use labor to do these things. Labor and creativity can be said to create wealth, but that is just another way of saying that one’s labor and actions are guided by knowledge to transform things that you own already to make them more valuable to you or to others.
I emphasize this because there’s an insidious argument that is commonly used, even by libertarians, by proponents of this idea of intellectual property. The argument goes like this:
Oh sure, I agree with you that if you find something in the state of nature that was never owned, you’re the owner. Finders keepers. Yes, that is one source of ownership. And sure, I agree that if someone transfers something to you by contract, which can include gifts, a contractual consensual voluntary transfer, that is another way you can come to own something.20 That’s another way of acquiring property rights.
So, they admit that we’re right on two things: you can come to own some scarce resource by finding it or buying it.
But they say if you create it, you also own it. It just seems natural. We’re used to thinking about this because what do we say in America? “You make money.” Now, all that really means is you had a profit from a certain entrepreneurial endeavor. These metaphors can mislead us if we’re not careful.21 You don’t really make money. (Now the Fed makes money, but that’s a different story! They don’t make real money. They make these artificial tickets we have now by printing them.)
Then they will say there are three ways to acquire ownership of things: you can find it, you can buy it, or you can create it. If you create it you should own it. It’s natural. If there is a thing that someone created, and it’s got to have an owner, well I guess it’s got to be the creator. He’s got the best connection to it. It just makes sense, right? Then they’ll say, well, who created that song? Didn’t you create that song? Who created that painting? Didn’t you create that painting? So, you’re the owner of it. The problem is they’re wrong. Creation is not a third means of acquiring ownership of things.
We can see it in the examples I gave already. Creation just means transforming things you own already. Think about a man who has a big chunk of marble. He owns it because he found it. He didn’t create any new ownable thing. I guess you could say he’s creative in finding it, but he’s not creative in the modern intellectual property sense. His neighbor sneaks over in the middle of the night and carves a statue out of it. Who owns the statue? Under current law, it’s indeterminate. Under libertarian law, the original guy owns it. This is a clear example that creation by the neighbor is not sufficient to give rights. It’s also not necessary since the first guy acquired ownership because he found it. So you can see that creation is neither necessary nor sufficient for property rights and things. Creation is not an independent source of ownership or property rights.
This is the mistake that is made over and over again by pro-IP libertarians. One libertarian philosopher says there are ontologically many types of things out there. Sure there are tangible things, but there are poems and movies. Why can’t we own those too?22
But what about, say, welfare rights? If rights are good, why can’t there by welfare rights? What do modern liberals say? They say, “oh, I believe in property rights, but there is “also” a right to education and a right to food. Now, of course, we libertarians already understand that the problem with this idea is that these rights are not free. They come from something else. When you have a set of rights allocated and you start giving out more rights, they have to start chipping into the previous ones recognized. They have to come from something else. Rights and obligations are correlative. If you have a right to education or welfare, someone’s got to provide it. They have to provide it out of their property. So recognizing “new” rights just amounts to a redistribution of property.
It’s the same thing with intellectual property, which is nothing but a redistribution of rights. It is a redistribution of property rights from the original owner of a thing, to someone who applied at a state agency for some kind of monopoly certificate that gives them the right to go to government courts to ask the court to point their guns at the original owner and tell them “you have to share your property with this guy, or you can’t use it in this way without this guy’s permission.” It is a way of redistributing property rights. The idea that you can just add IP rights to the set of property rights in scarce resources is a pernicious one that leads to redistribution of control that owners have over their property, to other people.
Here is what’s perverse about it. As I’ve already pointed out, the free market is working to let humans overcome scarcity. Yet, you have people who advocate intellectual property rights in the name of the market. What’s going on here? They’re actually imposing an artificial scarcity on things that are non-scarce by their nature.23 The free market is trying to overcome the problem of scarcity. These people are saying, “let’s make something that is already free and not scarce artificially scarce just like real things are.” Why would we want to do this?
Let’s imagine we had the ability to change physical laws so that you could easily duplicate a car just by looking at it. I look at your Rolls Royce and I blink my eyes and I have my own. It didn’t take anything from you. You can still drive your car around. Who would be against that? Well, the auto workers’ union would be against it I guess, but normal people wouldn’t be against this. This would be free wealth — a good thing.
Yet, we already have this idealized situation in the case of knowledge. We have an expanding base of knowledge that we have all benefited from. It is growing all the time with every succeeding generation. The idea of shackling it is crazy. Why would libertarians support the government in imposing restraint on information?
IP as Censorship and Monopoly
There was one free market economist who actually wrote for one of the free market think tanks that many of you have probably read from before. He explicitly says “patents and copyrights slow down the diffusion of new ideas for a reason: to ensure there will be more new ideas to diffuse.”24 We can debate whether he’s right about this means (slowing down the diffusion of ideas by means of state grants of monopoly privilege) achieving this end (ensuring there are more new ideas generated). I think, of course, that he’s wrong — obviously wrong — but he’s admitting that IP advocates want to slow down the spread of ideas. They want to make it more difficult to spread ideas.
There was a recent Salon magazine article about copyright in China. The magazine article’s author sort of innocently stated that “We may have more to gain, economically, from removing impediments to the widespread distribution of knowledge than from attempting to restrict them.”25 Oh really!
It should be no surprise that patent and copyright have such perverse effects. If you realize the history of these statutes, it is no surprise at all. Patents originated in the granting of monopoly privileges by monarchs. The first modern patent statute is called the Statute of Monopolies of 1623 in England. A patent was given to Sir Francis Drake, a notorious pirate, or privateer as he was euphemistically called, in the late 1500s, which authorized him to go around looting Spanish ships. The origin of patents is in privilege, monopoly, and real piracy. So all these proponents of intellectual property who point their fingers at today’s “pirates” and are against piracy, well, there is a link between piracy and intellectual property: they go hand in hand.26
Copyright’s origin is literally in censorship. Before the printing press, the state and the church found it pretty easy to control the distribution of thought. There were certain scribes who would copy books by hand. So the state and church could stop people from copying what they didn’t want copied. The printing press started to upset matters and so the state established an elaborate system of monopolies and controls over the use of printing presses. This led to the Statute of Anne in 1710 in England, is the first modern copyright statute. Actually, part of the reason that some authors in the French Revolution, and even in England, were in favor of modern copyright laws was they wanted the control back. The government was controlling whether their own works could be reproduced. It wasn’t a desire to get this monopoly from the state to go around suing people to stop them from reading their work. It was a desire just to have the ability to have it reproduced and copied.27 So the entire history of patent and copyright lies in statism. It lies in piracy — real piracy — pirates that kill people and break things, not guys that have a Jolly Roger banner on their website.
Let me give an example of a mousetrap. Let’s say some guy makes a mousetrap. He gets the idea to improve the standard mousetrap by coating it with Teflon. He figures these rat guts are sticky; they keep sticking to my mousetrap. I’ll coat it with Teflon and this will make a better mousetrap. So maybe he sells some and when he sells his mousetrap a lot of people learn about it. The realize, “Hey, it’s possible to make a mousetrap out of Teflon. It works even better.”
Let’s say I have some Teflon and a mousetrap. I improve my own mousetrap by adding Teflon to it. Now, the first guy has a patent on his Teflon-coated mousetrap. He can actually get a court order, an injunction, that tells me I cannot make this mousetrap even in the privacy of my own home or I will go to jail. This is really the force of government. So this is just an example of how patent rights literally rob people of their property rights. (Note: the patentee can do this to me even if I independently came up with the idea of a Teflon-coated mousetrap; even if I came up with it first.)28
The IP Mistake
Why did this happen? How did my property get transferred to this patentee? Ultimately, causally, it was transferred because of a mistake, a mistake in the law, a mistake in people’s thinking, a mistake in believing that ideas can be owned. Ideas cannot be owned. Ideas guide action. Means of action are scarce. Property rights are recognized in means because they’re scarce. Ideas are not scarce things. They are infinitely reproducible. The growing body of knowledge is a boon to mankind.
We need to cast off the mistakes of the past. The young libertarians — you get this. You’re immersed in the internet, digital information, easy access to online books and online information, billions of pages of information available at your fingertips, yeasty productivity, copying, emulating, file-sharing, social networking and borrowing. The movie The Social Network depicts Mark Zuckerberg, the creator of Facebook, as being accused of stealing the Winklevoss twins’ idea. He was rightly outraged at the suggestion. He says, “Does a guy who makes a really good chair owe money to anyone who ever made a chair”?29
He’s right. The very idea is ridiculous. Copying information and ideas is not stealing. Learning is not stealing. Using information is not trespass. I urge you young libertarians to stay on the vanguard of intellectual freedom. Fight the shackles of patent and copyright and keep on learning.
Stephan Kinsella is an attorney and libertarian writer in Houston, Senior Fellow of the Ludwig von Mises Institute, the founder and editor of Libertarian Papers, and founder and Director of the Center for the Study of Innovative Freedom (C4SIF). His most recent book is Property, Freedom, and Society: Essays in Honor of Hans-Hermann Hoppe (co-editor, with Jörg Guido Hülsmann; Mises Institute, 2009).
This paper is based on my speech of the same title delivered Nov. 6, 2010, at the 2010 Students for Liberty Texas Regional Conference, University of Texas, Austin; audio and video available at www.stephankinsella.com/media/. A previous version was published under the same title in Economic Notes No. 113 (Libertarian Alliance, 2011).
All of my articles cited herein may be found at www.stephankinsella.com/publications/. For more extensive treatment of some of the ideas dealt with in this article, see my monograph Against Intellectual Property(Mises 2008), and my articles “The Case Against IP: A Concise Guide,” Mises Daily(Sep. 4, 2009), “Intellectual Property and Libertarianism,” Mises Daily (Nov. 17, 2009), and “What Libertarianism Is,” Mises Daily (August 21, 2009). ↩
For further discussion of the structure of human action and its relationship to IP, see note 13 and accompanying text, et pass., of my article “Ideas are Free: The Case Against Intellectual Property,” Mises Daily (Nov. 23, 2010). ↩
For further discussion of the nature of human action, see n.4 and accompanying text of my “Ideas are Free”; also Stephan Kinsella & Patrick Tinsley, “Causation and Aggression,” The Quarterly Journal of Austrian Economics 7 no. 4 (Winter 2004): 97–112. ↩
Non-scarce things are classified by Austrians as “general conditions” of action, as opposed to scarce means or goods. See Ludwig von Mises, Human Action (Mises Institute, 4th ed., 1996), ch. 4, sec. 1, and Murray N. Rothbard, Man, Economy and State (Mises Institute 2004), ch. 1, sec. 2, both available at mises.org. ↩
See Hans-Hermann Hoppe, “Praxeology and Economic Science,” in Economic Science and the Austrian Method (Mises Institute, 1995), text following n. 18 (“All of these categories—values, ends, means, choice, preference, cost, profit and loss, as well as time and causality—are implied in the axiom of action.”); idem, A Theory of Socialism and Capitalism: Economics, Politics, and Ethics (Mises Institute 2010 ), p. 141; and idem, “In Defense of Extreme Rationalism: Thoughts on Donald McCloskey’s The Rhetoric of Economics,” Review of Austrian Economics 3, no. 1 (1989), p. 200; both available at hanshoppe.com/publications. ↩
See Hans-Hermann Hoppe, “Rothbardian Ethics,” LewRockwell.com (May 20, 2002) (“The existence of Friday the gorilla poses for Crusoe merely a technical problem, not a moral one. Crusoe has no other choice but to learn how to successfully manage and control the movements of the gorilla just as he must learn to manage and control the inanimate objects of his environment.”); idem, Democracy: The God That Failed (Transaction, 2001), pp. 201–202. ↩
See Ludwig von Mises, Economic Calculation in the Socialist Commonwealth (1920), idem, Human Action, ch. 16, secs. 1–3, and other references in Kinsella, “Knowledge vs. Calculation,” Mises Economics Blog (July 11, 2006). ↩
See Stephan Kinsella, “How much richer would be in a free society? L. Neil Smith’s great speech,” StephanKinsella.com (Nov. 7, 2009). ↩
See “Intellectual Property and Libertarianism,” text at n. 26; and Kinsella, “Locke on IP; Mises, Rothbard, and Rand on Creation, Production, and ‘Rearranging,’” Mises Economics Blog (Sep. 29, 2010). ↩
See Murray N. Rothbard, “Toward a Reconstruction of Utility and Welfare Economics,” Mises Daily (July 8, 2006). ↩
See Kinsella, “A Libertarian Theory of Contract: Title Transfer, Binding Promises, and Inalienability,” Journal of Libertarian Studies 17, no. 2 (Spring 2003): 11-37. ↩
See Kinsella, “Objectivist Law Prof Mossoff on Copyright; or, the Misuse of Labor, Value, and Creation Metaphors,” Mises Economics Blog (Jan. 3, 2008). ↩
See Kinsella, “Common Misconceptions about Plagiarism and Patents: A Call for an Independent Inventor Defense,” Mises Economics Blog (Nov. 21, 2009). ↩