The available supply of every commodity is limited. If it were not scarce with regard to the demand of the public, the thing in question would not be considered an economic good, and no price would be paid for it.There is a very important insight. If a price is being paid for something, it is scarce, otherwise no one would pay for it. Does this apply to ideas?
Suppose, W has, say, the "Drudge formula," which provides a method by which W has discovered a way to get Drudge to link to posts at blogs and W sells this formula to X for $10,000 under the condition that he not reveal it to anyone else. If X pays $10,000 for it, surely it is an economic good of some sort. It may not be physical property, but, again, if X is paying $10,000 for it, it is something of value in the eyes of X, and thus, physical property or not, it is an economic good. Given that Austrian economists, as parxeologists, look at human action as a signal to what is valued, an Austrian economist would most certainly say that if someone were paying $10,000 for something, it indicates the thing, physical or not, is a scarce economic good.
Let us move on in our example and consider what occurs if X breaks the contract and sells the formula to Z. Then, Z also must consider it scarce since he paid X or the formula.
If we stop here, we can see that X has broken a contract. We can also see that at this point W, X and Z have the formula.
This is how such a broken contract would be dealt with in the physical world. Say Hertz rents a car to driver D under the condition that D return it in a week, but instead of returning the car to Hertz, D sells it to a third party, T.
Under current property law, Hertz would have the right to take the car back from T. It would not be hard to understand how this rule would probably apply in most free market societies.
How is this different from the broken contract involving the "Drudge formula"? It appears not to differ in the sense that a third party has obtained an economic good only as the result of someone breaking a contract.
In the "Drudge formula" case, X broke the contract by selling it to Z. Let's move on. We know this formula is an economic good because Z paid for the formula. Let us now assume that Z then begins to sell it to others. This increases the supply of the product, thus putting downward pressure on the price The downward pressure on the price damages W by decreasing his revenue stream because of the lower price. Why can't he, like Hertz, go to Z and say "stop selling the formula," you acquired it under a broken contract that is causing damage to me (just like the car was damaging Hertz because of a broken contract)?
Why shouldn't this hold? An economic good had been transferred via a broken contract and the original contractor is being damaged by the broken contract? To argue that there is no scarcity, because W still has the formula, is in error, scarcity remains, the only thing that changes is the revenue stream in a direction that W did not give up the right to. That is X broke a contract and sold it to Z, who is now benefitting from a revenue stream that W never agreed to give up. Why should W not have the claim to stop Z from using the formula in any way, in the same manner that Hertz has a claim to stop T from using a car obtained by a broken contract?
The Kinsella/Tucker anti-IP theory has at its core an odd definition of scarcity, in that, it argues an idea isn't scarce even if the idea trades in the market at a price, the very definition of scarcity for an economist. Thus, even if a record company is selling copies of a record album at the same time that teenagers are downloading without buying from the record company, Kinsella/Tucker would argue that there is no scarcity. But one must ask, why are some people paying for the record, if it is not scarce?
The record company may have a copy of the song, but downloads that exist because of broken contracts certainly damage the cash flow of the record company.
In the Kinsella/Tucker world, this damage is ignored but it is at the heart of their theory. Their view really boils down to this: Ignore damages to the initial creators/owners, especially cash flow damages---even if some creators, say, hate country music, but are good at creating country music and do so only for the cash flow. The Kinsella/Tucker view is tough luck for the creators/owners about the loss of cash flow, they have a copy of the record, they can listen to it, if they want. The Kinsella/Tucker view is really not about the lack of scarcity. It is about the redistribution of wealth from a creator/legitimate owner by giving some of that wealth to someone who obtained the wealth from someone who did not have title to sell the economic good. Not much different from the person who has a car that was purchased from someone who did not have title to sell the car.
The Kinsella/Tucker theory is as far from recognizing legitimate ownership of a scarce good as one can get, since ownership is not, say in the case of a song, simply the right to listen to it, or sell it in competition against some one who has obtained the ability to sell the economic good as a result of a broken contract, but also any other rights attached to that ownership , including the sole right to sell it or assign it in use in any manner. Kinsella/Tucker do not discuss these benefits of ownership, they ignore them or aggressively advocate redistribution of some of the benefits away from the original creators/owners.
This isn't free market respect for property, it is re-distribution of wealth via central planner, away from the initial property owners of specific economic goods. The odd definition of scarcity used by Kinsella/Tucker is simply cover for what is really a re-distribution program.