## Wednesday, April 3, 2013

### Understanding Scarcity with a Little Help from Ludwig von Mises

In Human Action, Ludwig von Mises writes:
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?

Why not?

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.

1. The scarce commodity is the *distribution* of ideas. The bandwidth, the computer, the printing press and paper, the radio, the sound studio, antennae, or megaphone.

Using the semantics that "ideas are not scarce" is silly and defeated by a simple thought experiment: "Well, if they weren't, then everyone would know everything."

The issue is that the creation, modification, and flow of ideas from one distribution to another cannot be controlled or even monitored by third parties. Without those aspects your contracts have as much enforceability as Alabama legislating that Pi is exactly 3.

1: Z independently arrives at the same drudge formula, X falsely accuses Y of breaking the contract.

2: Y has more friends and makes the obvious choice to break the contract by selling the formula 100 times for \$9000 and uses some of the money to pay the stipulated contract penalty.

3: Y modifies the idea in a way such that it no longer considered the same idea in the language of the contract but is still functional. Similar: Y modifies the idea by removing a cryptographic signal used by X to track proliferation.

The closest you can get to intellectual property is a kickstarter like pattern. "I will release this idea to everyone if I get pledges of at least \$i."

1. Protection against violation of a contract is a separate matter. I could require penalties on a contract that are so onerous that a person would not want to violate the contract, but be willing to except such a clause because the person has no intention of violating the disbursement clause of the contract.

As for identifying who broke a contract, there are many ways this could be handled. For example, (one of many), I could alter by Drudge formula in some irrelevant manner to each person I sell it to, thus identifying who broke the contract by determining which alteration the formula has.

2. That doesn't solve the issue of independent creation.

Suppose there are several possible mechanics which generate the result "Drudge link." Your hypothetical idea implements one method. XY contract occurs. Z develops unique and independent mechanism which also produces "Drudge link." Only the result is publicly visible so the implementing method or verification of its origin is not available to X or Y. In fact, every single link which appears on Drudge that was not created by X or Y is circumstantial evidence that someone has violated the contract. The result of the Drudge example is a public display; if the function of the idea were something able to be kept private then violations could occur rampantly with neither X or Y ever becoming aware.

What about protection for Y? If the penalty for breaking the contract is particularly onerous then X could secretly break it in order to blame Y for the violation and claim a new source of revenue from the penalty. Y, not possessing a surveillance state to prove otherwise, would have no defense. In fact, in this situation X would have access to any "security by obscurity" identification modifications made to any sold idea and so targeting Y specifically would be trivial.

The end result of these contracts is prisoner's dilemma. X and Y gain the most productive value directly from the idea when it remains unique to their knowledge. Both X and Y could gain a different kind of value by transmitting that idea to third parties at the cost of reducing its direct production value. If the contract implements violation penalty transfers from X to Y or Y to X then that is actually another potential revenue source as one party can easily frame the other for contract violation and claim it. One would have to be a fool to enter such a contract without central authorities to surveil, investigate, and enforce it.

The end result is the consideration between the relative amount of productive value from an idea when it is only possessed by a small number of trusted parties, verses the value gained by exchanging that idea to third parties. The very large pool of potential third parties will almost always landslide the balance in favor of defection by transmission. Without centralized control, the incentives push access to all ideas towards all consumers; it is a beautiful economic outcome.

3. FYI Robert, I fully expect the anti-IP crowd to engage in voluminous amounts of circular reasoning, straw manning, red herrings, ad-hominem, and whatever other logical fallacies they can throw at you.

When that fails, they will attempt to overpower you with sheer volume of words, and wear you out.

I am of this opinion because this was my experience on the comment boards of Mises.org. They seem to have a fanatical zeal about this subject. This is not surprising: they are INTELLECTUAL COMMUNISTS.

The pseudonymous Strangerous has written a brilliant and exhaustive essay which destroys the Intellectual Communists here: http://strangerousthoughts.wordpress.com/2010/11/14/the-economic-principles-of-intellectual-property-and-the-fallacies-of-intellectual-communism/

I highly recommend you read it, and perhaps discuss some of his ideas and create a post on it so that EPJ readers (who don't read the comments) will avail themselves of it.

I personally am of the opinion that the IP system has been abused by the corporatists to their crony advantage (much like everything else in the legal system), and that IP laws need to be reviewed and re-written e.g. to give more flexibility to the IP producer, to prevent patenting naturally occurring genetic code, etc. However the purpose of IP is sound, and a society should be able to declare it property and engage in whatever appropriate defense of such.

Mises.org would do well to purge the Intellectual Communists. They are (wittingly or unwittingly) tools of the crony capitalists, and an unseemly parasite that has attached itself to Mises. Austrians and Libertarians would do well to flick them off.

4. FYI, this is the Intellectual Communists’ main tactic: They conflate the manner in which information is distributed (or stored) with the information itself. Cheers!

5. And furthermore, there are some excellent arguments here as well http://mindbodypolitic.com/2011/03/25/friends-and-foes-please-cite-if-you-pick-up-leads-from-this-blog/

6. Having run out of logic, the Pro IP group is now name-calling with the term "Intellectual Communists", an obvious case of begging the question. Communism is the rejection of property rights. The IP debate is about whether ideas are property, not about whether property rights are to be respected. Further Kinsella's argument is based on property rights and makes the case that IP is a violation of property rights.

Before accusing the anti-IP crowd of engaging in voluminous amounts of circular reasoning, straw manning, red herrings, and ad-hominem arguments, it would be better to present a logical argument instead of committing those very errors while irrelevantly and inaccurately smearing your opponents.

7. And now the anti-IP begins the gnashing of teeth, the tearing of clothes, and the slinging of accusations of logical fallacies in all directions, in the desperate hope that something, ANYTHING will stick...

"Communism is the rejection of property rights. The IP debate is about whether ideas are property, not about whether property rights are to be respected."

...And since the anti-IP crowd wants... No more intellectual property rights, which would then mean nobody owns any ideas, or rather all ideas are owned by everyone, then that makes them... Intellectual Property Communists!

If the shoe fits, can you still call a spade a spade?

At least you will provide some comic relief in the process. My only problem with people like you is that by being so dishonest and irrational, you give the Liberty movement a bad name.

2. You continue to badly mess this up. What you say about selling your "formula" is absolutely fine and Kinsella doesn't care if you do that. In fact, he supports your right to contract. What he DISAGREES with is that the government should grant you OWNERSHIP of the "formula".

What if I figure out the "formula" later by myself. Then I start selling it. You sure as Hell should not be able to have the government beat me up because I am selling "your" "formula.

1. Independent discovery is protected... You missed that.

2. Strawman. I am discussing a free market society, where law enforcement for intellectual property is done by the same groups that enforce free market private property law.

3. How does that work under this scheme, exactly?

Because some guy thinks he owns some information, if anyone else uses that information, they have to answer -- somehow -- to this guy and somehow prove they independently came up with the information?

What if the other independent discoverer of the information is not some crackpot who thinks he owns information and simply shares it on the internet? Then what? Even though he independently came up with the information, isn't the information crank "damaged" under this scheme as well?

I mean, this just makes zero sense to me.

4. Wenzel:

Do try to keep up and not evade:

"You continue to badly mess this up. What you say about selling your "formula" is absolutely fine and Kinsella doesn't care if you do that. In fact, he supports your right to contract. What he DISAGREES with is that the [INSERT USER OF FORCE HERE] should grant you OWNERSHIP of the "formula"."

5. Is it acceptable to use force to protect your person?

If so, is it also acceptable to protect your property?

Mises says: “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.”
To simplify:
If not scarce, its not economic good, no price for it.
Or in other words; if scarce=economic good=has price.

But no where is he saying that a non-scarce good can’t also have a price on it

1. Yes. Not only this, but Wenzel also makes the jump that all economic goods are ownable resources.

2. Another question in my mind. If the test of whether or not something is "scarce" in an economic sense is that someone will pay for it, I'm wondering how blackmail might fit into this. So far all the examples are about somebody paying to acquire knowledge, but people who are paying blackmail are paying to prevent knowledge from getting out. But if knowledge (or ideas) are "scarce," why would anyone ever need to pay blackmail?

3. Huh? That's precisely what he's saying. If it were not scarce, no price would be payed for it.

4. The problem is that Wenzel is committing the affirming the consequent fallacy, sometimes also called converse error or fallacy of the converse.

His argument is of the form:

1. If Scarce, then Price.
2. Price.
3. Therefore Scarce.

This is a fallacy because 3 can be false even while 1 and 2 are both true. Since scarcity was never asserted as the only sufficient condition for price, other factors could account for price (while scarcity was false).

5. Scarcity is a subjective concept. It is the resultant of subjective valuations; not AGGREGATE supply &/or demand. This is why one good may be scarce in one location and not another. Therefore if the individual making the valuation deems it scarce he will be inclined to pay a price in a contractual society for it. Where there is a contract there is enforcement. This is why ideas can be 'scarce'. (Also keep in mind Robert addressed enforcement and the need for buyers / sellers to weigh the cost benefits involved as well as protection for independent discovery)

Though ideas may be 'infinitely' copied this does not make them not scarce. In fact it's quite wrong. Consider that books may be infinitely printed but there are better uses of the resources involved, just as is a limit on aggregate human faculty. They have to be available in super-abundance to the individual by the fact of existence for this to be the case.

i.e. We are born into an atmosphere containing a superabundance of air. At present there is no need to influence the situation (in most cases) through action to economize it as a good. Being that the object of economizing implies scarcity the absence of it implies an absence of scarcity.We are not born into a super abundance of knowledge however. If we were there would be no uncertainty. We do use our ideas to struggle with uncertainty and this proves the scarcity of ideas as theorems from which to construct our actions.

We obtain knowledge and ideas only through social cooperation with others or our own experience (i.e. independent discovery). If some would like to give us gifts of knowledge and ideas this may be the case. If others wish to flaunt their knowledge freely. This may also be the case. However if one engages in a contractual relationship with another to protect their knowledge this contract would be as binding as any other. For one party has shared with another a scarce economic good to be used in the removal of some uncertainty. Hence the value attributed to knowledge and ideas. We must also keep in mind it is the market that sets this price; not the buyer or seller alone. Thus when an idea goes 'viral' it also becomes worthless so to speak. The increased supply makes it virtually costless other than the upkeep required of the individual.

Being that we can't know everything and there is a limit to our faculty this introduces the need for an allocation of ideas. If ideas are super abundant and not scarce why do human beings seek to retain any? Why do they engage in social relationships based on the cooperation and specialization of various ideas (a division of labor of ideas). In the Tucker / Kinsella world there is no organization. Ideas are homogeneous and just a blob to be cherry picked from as needed. It's like Keynesian capital blobs - all wrong.

One person below said it was the means which are valued. If this were the case all teachers, ceteris paribus, would be equally valued with no one teacher able to profit more from their distinct and specialized ideas or knowledge. We would have no way of explaining why they make excess the market rate of interest of the aggregate factors involved less their peculiar knowledge. Where did the excess value come from? It is this scarcity of ideas and knowledge which gives the value. Otherwise we could all be teachers, carpenters, entrepreneurs, artists and speculators alternating between roles at whim.

Kinsella called Robert dangerous and socialistic, imagine the implication of taking the non-scarcity of ideas to it's fullest extent. We would forget everything assuming that everyone else knows it. After all... ideas are not scarce so why bother bearing the cost of remembering.

6. "Kinsella called Robert dangerous and socialistic,"

That's rich, since (whether he admits it or not) Kinsella is an IP Communist.

7. Dave,

I'm having a hard time understanding this "IP Communist" thing.

Kinsella's entire point is that, by assigning property rights in patterns of information, property rights in physical things are undercut. Communists of course advocate undercutting property rights in physical things, and they care far more about your money and your stuff than your patterns of information. So Kinsella is defending against precisely what you are accusing him of being.

People who support assigning property rights in patterns of information, on the other hand, support undercutting property rights in physical things. So, people who support assigning property rights in patterns of information are saying that these rights are more important than rights in physical things. Communists would agree.

4. What percentage of the articles on Drudge right now are there due to violations of your IP?

Surely some of the articles linked have used it unknowingly by chance.

Should you pursue some sort of legal claim?

As long as there's articles on Drudge there's a good chance your IP has been inadvertently violated.

If people able to stop people selling it is what's important, it actually damages you more: if Z is prevented from selling he will just distribute it for free, reducing your fee to zero.

1. Independent discovery is not a violation under the Rothbardian view of intellectual property, which is chiefly the view I hold.

2. IP enforcers lack the knowledge to be able to distinguish between independent discovery and copycat.

3. IP enforcers lack the knowledge to be able to separate independent discovery from copycat. You would invariably be putting innocent people into prison even in your own framework.

5. Robert, you often repeat that you profit from "Drudge formula" you've discovered. However, you didn't invent Drudge report itself, did you? So, what you are saying is that you profit from other people idea without asking their permition to do so. Aren't you in violation of your own theory of IP? Serious question.

1. Drudge offers links to web pages, he is free to use links I own or not. What law am I violating? I am not forcing him to do anything.

2. Someone using "your" formula are also not forcing you to do anything.

6. Bob,

Please stop embarrassing yourself by using the Hertz example. If Hertz loans the car to D and then D sells the car to T, then HERTZ IS OUT OF A CAR! If you tell your formula to X and then Z gets the formula through whatever means, YOU STILL HAVE THE FORMULA TO USE HOW YOU WISH! This is the essence of scarcity and rivalry in the economic sense. It is not just Tucker and Kinsella who use this definition:

http://en.wikipedia.org/wiki/Rivalry_(economics)

Now it sounds like you are arguing the creator of an idea has some sort of rights to cash flows or profits from the idea? FYI, there is nothing dishonorable about conceding defeat…

1. You do not still have the same formula using the Hertz analogy. The equation still has the same basic functionality, but the quality of results and value, are no longer the same. This would be like Hertz renting a Lambo to person B, who then sells it to C, and saying the just thing to do is to have Hertz and person C split the Lambo to make each party a Pinto. You still both have cars that can get you from point A to B but with much different effectiveness.

7. Now this is what I want to see. A substantive argument, a theory (or at least the start of one). Kudos for posting this. Going to have to think through this a bit more.

It probably would have been better if the debate had via written exchange like this.

8. Ideas are not scarce. Just because you pay for an idea it does not make it scarce.

If anything I would say that you are not entitled to profit. Just because you worked on something does not mean that you deserve to gain the value that YOU think is right. Only the market can decide this.

This means you have to deal with market realities. If your product can be infinitely copied at no cost then it is your duty to protect it accordingly. If you sell it to someone you have to recognize the possibility that the product will be copied infinitely.

If I was a company that provides security services I would not enforce such a contract. Because it is simply to expensive to go after everyone beyond the first person you contracted with.

Whether you support the state enforcement or the anarchist enforcement it is irrelevant. What is relevant is that we agree on whether we should spend our efforts enforcing IP. To this I stand with Kinsela and think that we should not.

1. "Whether you support the state enforcement or the anarchist enforcement it is irrelevant. What is relevant is that we agree on whether we should spend our efforts enforcing IP. To this I stand with Kinsela and think that we should not."

What's with this "we" and "our" business? Feel free to not spend YOUR time on whatever you don't want to spend it on. Who are you to decide what I and another party spend OUR time on?

As I have suggested elsewhere, enforcement, for me, is the only issue. The rest of this is all noise to me.

Despite the potential futility of private and contractual means of enforcement regarding IP in many cases, under what libertarian theory is it valid to outlaw through force such agreements? Is there a non-aggressive means to disallow two individuals from contracting regarding IP? Please, advance a possibility! What violation of NAP is caused to a third party if I and another party decide on such a contract?

More central planning by so-called libertarians.... What is so scary about free markets?

2. Well put Bionic Mosquito.

3. Bionic:

"under what libertarian theory is it valid to outlaw through force such agreements?"

The same question can be rhetorically asked to pro-IP advocates? Under what libertarian theory is it valid to outlaw through force an agreement between B and C that does not deprive A of anything they own?

Is there a non-aggressive means to disallow two individuals from contracting regarding IP? Please, advance a possibility! What violation of NAP is caused to a third party if I and another party decide on such a contract?

4. pete and repete

This is very helpful; could you please clarify a couple of points, as you are shedding light where I was previously bathed in darkness:

1) Can you clarify the difference in libertarian theory between government-applied force and contractually-applied force? This is obviously an area that I do not at all understand.

2) Your counter example is truly eye-opening: “Under what libertarian theory is it valid to outlaw through force an agreement between B and C that does not deprive A of anything they own?”

Can you apply this brilliant insight to the following example:

“A” is Coca Cola, more specifically the formula they “claim” (hahaha, now that I have read your enlightening words, I use the term laughingly) to own.

“B” is a scientist in the Coca-Cola lab, privy to the formula, yet bound by terms of his employment.

“C” is “B’s” buddy that works at Pepsi.

Thank you for your patience, and forgive my inability to so quickly understand your viewpoint.

9. What if someone else comes up with the same formula entirely by themselves? Do they have to prove it? Did you ever have to prove you "invented" it? Can they give it away to anyone they want?

1. I have no problem with independent discovery. do you?

2. You have a problem with enforcement based on distinguishing the two.

3. Independent and/or original discovery is not provable since mind-reading is merely a pretense of the pseudo-science called psychology.

4. Problem is that no one ever discovered anything independently. Your formula would necessarily involve the use of mathematics which you had nothing to do with creating as well as involving a host of other things that you had nothing to do with creating or realizing.

It seems to me that you have still never been able to prove that the information you supposedly possess is actually yours. How did you obtain it? Why does it belong to you and you alone? If you use other knowledge when creating your formula, did you do it entirely with the permission of those before you?

It's hard to imagine that someone has claim to the entirety of something just because they put the cherry on top. Imagine a team of scientists working for years to create this "drudge" formula. Then after years, one of them figures the variable that needed changed and VOILA! IT WORKS!

Does it belong entirely to him? Just because he was the first there? This is essentially what you have done with your drudge formula. You have used the knowledge of a 1000 generations to create your formula and then are claiming the fruit all for yourself.

I really need it explained to me how your claim of ownership is valid.

5. "I have no problem with independent discovery."

You should have some problems with it. Let me enumerate:

First, copyrights do not protect ideas as such;

Second, patents do not protect secret ideas;

Third, people that learned your secret recipe can use it, well, secretly, just as you do it.

Forth, even if a person who learned about your secret recipe publishes it wide on the internet, how are you going to prove he learned the secret from you and didn't discover it by himself?

Fifth, even if that person also discloses the he did in fact learned it from you, how are you going to punish that person without governments police, jails, and IP laws and without violating NAP principle? You didn't loose anything by the action of that person beside potential loss of potential customers money which you don't own.

Six, if your secret becomes public knowledge, how are you going to put genie back into bottle?

10. I'd like to here his retort to this.

11. Is a wager an economic good? Why isn't a particular exacta bet considered the intellectual property of the first bettor?

Is an economic good the same as a commodity? What role does depreciation play in evaluating a "good"?

Is an option considered property? Why not intellectual property?

12. Not at all. I had a record copy of Pink Floyds dark side of the and moon that I bought second ond hand which has since worn out but before that happened I ripped it to a mp3 format. Do I have some contract with the band? No, of course not.
The main issue for the music industry was that it refused to change and meet the demands of their customers when the costs of content and delivery fell to not much at all so when the product is still greatly desired but the price stayed the same, a giant black market, or at least a very grey one.
I will point there is a vast industry that survives without IP in clothing.
The dispute in this case is that the Kissella argument comes from the Anarchist ideal where IP protectionism is considered monopoly granted by the state to special interests(which I notice Rob carefully avoids) and libertarian contract theory.

1. "Not at all. I had a record copy of Pink Floyds dark side of the and moon that I bought second ond hand which has since worn out but before that happened I ripped it to a mp3 format. Do I have some contract with the band? No, of course not." It depends upon the terms set by the publisher of the album.

2. Terms on WHAT contract? There is no contract between Heath and Pink Floyd's publisher.

13. How do you propose to enforce this property right against a third party without violating nonaggression principal ? If you argue that you wouldn't be initiating force because the third party aggressed first against your future income stream, How do you differentiate against normal competition ?

1. Intellectual property rights would be enforced in a free market the same way physical property rights would be enforced in a free market society.

2. This is a circular argument. Aggression is simply the violation of rights. If IP law is legitimate, then Z does not have the right to sell the formula. Then in fact, Z is committing aggression against the formula's originator and the employment of violence in order to stop this aggression is justified.

3. "This is a circular argument."

Sounds like you're new around here.

14. When you download a song, "the good" is not the song, but the byte stream. The song is the 'effect' that that byte stream has on YOUR ears, or your brain. And this effect is completely your; it's a your emotion/idea/effect/thought.

If you download MSWindows and 'play' it with with an MP3 player, then Microsoft does not 'own' the melody.

And so, the car is the good and it's Hertz' property. But the arms, the legs, the ideas that the act of driving generate in your brain are YOURS. Moreover if you copy the car by, let's say, a 3D printing machine, you are reproducing a setup of atoms.

15. Robert, your error is your assumption that every economic good can be the subject of property rights.

Some things that people place value on are not ownable resources. For example, imagine that you agree to transfer a sum of money to me if I come to your party and perform a certain action. I own my body and determine what uses to put it to, so you offer a sum of money to induce me to put it to a use that will please you. We both benefit, but the only transfer of owned resources is the transfer of money from you to me. My performance is a good, but is not an ownable resource.

In your broken contract example, there is nothing to "take back" from Z because you still have the formula. This is the critical point that you have not provided an argument against, so you are simply engaging in question begging by comparing knowledge to physical things.

Your use of the word "damage" is sloppy and applies to competition in general.

Kinsella's theory obviously does not advocate redistribution; it simply recognizes that property is a normative concept designed to make conflict-free interaction possible by stipulating mutually binding rules of conduct regarding scarce resources, and that attempting to assign property rights in knowledge necessarily undercuts real property rights.

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17. They also don't seem to understand that ideas are not infinitely copy-able. My memory can only hold so much. This is why I must choose what ideas I would like to hold onto and develop, and those I do not wish to. Unless of course one has the memory of God or Cam Jansen.

Electronic mediums such as mp3s etc. are not infinitely copy-able as well. They can only be copied to a point before owners of computers must choose whether they value storing the music or something else. (Same goes for books - you're limited to the resources needed for their production). Thus they are scarce. Why would people devote valuable resources to valueless goods?

In the end anything is infinitely producible in an abundant world. We however, deal with the fact of scarcity. It is the fact that we must choose in some way as to allocation which implies the existence of scarcity. The scarcity implies that we do not have something things though we may value them, which allows us to arrive at prices.

I agree with you Robert, though I'm not sure he would agree with my above statement (which may need some qualifying revision); but I hope I'm getting across what I'm trying to say.

I also think the important point he made about the cost / benefit of enforcement is critical to understanding how the concept would apply in a free society absent 'free' government services such as law enforcement. No customer would be willing to patron a business they knew would not be worth it (higher cost / risk than benefit). Also those generating such property would have to settle for the markets ruling on price and terms and conditions as well.

1. Air is of limited amount but we do not consider it scarce (in ordinary life).

So why should we consider 1 cent song to be scarce?

2. One cent is a price.Why do you have any price in your model? That sounds like scarcity

3. I agree but the cost is on me to copy not on you. You do not lose the song. I simply gain one.

So this is simply a reality of the market not me proving that ideas are not scarce.

As far as ideas not being scarce it is the fact that potentially any person in the world can obtain your idea. What is the marginal utility of two of the same ideas to the same person? Zero. The same way me breathing technically means you can never breathe the air I used up. But you don't care because there is more than enough for you to breathe.

It is all about how we choose to work with each other. Under your system if I am to respect your views I would be forced to deny my self use of my own computer in the way I want to. When we have such a conflict I prefer a thousand dollar computer over one cent song or the drudge formula that I can copy for the similar price.

4. A one-cent song is still transferred by a medium. The price of the medium is one cent--not the song.

5. "One cent is a price.Why do you have any price in your model? That sounds like scarcity"

A. Scarce objects have value;
B. Ideas have value;
Ergo ideas are scarce objects.
Do you see a problem with this reasoning?

6. @ Andrew

If you added the word "Unique" in front of "ideas" it makes it interesting.

18. I am not sure it is correct to use an economic definition of scarcity to justify a law principle. Economics is not law.

I think Kinsella's argument is this: there is a distinguishing attribute between the classes "intellectual things" and "physical things" such that the first class of things can not give rise to conflicts while the second can. Let's call this attribute rivalrous.

A conflict occurs when two actors attempt to employ the same means to different ends. A necessary and sufficient condition for a thing to be rivalrous is one: the thing is a means in the eyes of both actors, and two: the employment of the thing by actor A implies the non-employment of the thing by actor B.

Ideas do not have this property because the employment of an idea by A does not imply the non-employment of the same idea by B.

Please point out the flaw in this reasoning.

Of course you can protect your IP to some degree via contract law in the ideal, anti-IP libertarian world. Anti-IP libertarians are still in favor of contract law. They merely argue that it is going to be inefficient and ineffective and in some cases counter-productive if you do not have the state to back up your IP claims.

"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)?"

I agree that *if* we agree that IP law is a legitimate form of law, then the use of force by the originator of the formula against Z to get him to stop selling it, is a legitimate use of force. But this is not an argument for the legitimacy of IP law -- that would be a circular argument -- this is an argument for the enforceability of IP law. But just because it can be enforced does not mean it should be enforced.

What is damaging Hertz is the car not being present for rental, sale or whatever ends Hertz had had in mind for it at the time when the rental contract expires. But in the case of the formula, you can still use it for whatever purpose you had in mind. What's damaging to you is the reasonable perception of less revenue due to fewer people spending their own money on you. If this kind of damage is sufficient to justify a law, then you should also be able to use violence against the seller of a competing (but different) formula, and then you should also be use violence against someone who uses slander and violence against you. Do you care to reiterate Rothbard's view on reputation rights?

19. Mises, p. 129, Human Action:

" A thing rendering such unlimited services is, for instance, the knowledge of the causal relation implied. The formula, the recipe that teaches us how to prepare coffee, provided it is known, renders unlimited services. It does not lose anything from its capacity to produce however often it is used; its productive power is inexhaustible; it is therefore not an economic good. Acting man is never faced with a situation in which he must choose between the use-value of a known formula and any other useful thing."

'Nuff said.

1. So what are you saying, Mises was inconsistent? Or MIses under stood that some ideas (but not all) are not scarce. Such as the language we are communicating in, English. This doesn't at all damage the view that some ideas are scarce. What is my Drudge formula?

2. The recipe for coffee is widely known...it is not a scarce idea. At some point in time, the man that come up with the idea of roasting coffee beans, grinding them, and running hot water through them decided to share it with someone else. He did not keep the secret of coffee to himself.

Maybe he received compensation for such knowledge(I'm not looking up the history of coffee right now), or maybe not.

Either way, it was his choice...and he made his idea known/not scarce.

His idea at one time was scarce though. The little caveat in Mises's statment is "provided it is known".

3. Bob,

Would you acknowledge that there exists a non-zero possibility that someone else on the planet, through independent discovery, currently has in their head the same drudge formula that you have?

4. The formula is equivalent to a new slang word for which you demand payment, confidentiality, and censorship.

5. I think that Mises meant this: all ideas are not scarce for whoever knows them. (Or "owns" them.)

Mr Wenzel, are you willing to concede that from your point of view, your Drudge formula is not scarce?

6. "What is my Drudge formula?"
Fondled any ball sacs today?

7. Nick, the recipe for a brand new food known only to Wenzel is not "owned" by Wenzel. Should I buy this new food from him, and reverse engineer the recipe, how is it, from a principled libertarian understanding of property rights, that Wenzel may not clamp down on me and the rest of my property (say I own a restaurant and am now selling this new recipe) and force me not to use my property in the manner in which I wish?

How can both IP protection and actual property right protection exist simultaneously? I submit that they cannot, because they are mutually exclusive.

8. No, bob, he was not inconsistent at all. You are confusing different points he is making.

I just appended a very long comment in reply to you on all this to my podcast post: http://www.stephankinsella.com/paf-podcast/kol-038-debate-with-robert-wenzel-on-intellectual-property/. I took time to be as explicit and detailed as I could to lay this out for you. I admit these issues are complicated so I do not blame you for being confused, but you ought to have a bit of humility and stop asserting things you obviousy are confused about, and instead question and take time to learn this, and to discard your flawed notions.

I will add this in a separate reply as I am not sure the long comment and html will transfer, so I suggest people go to my post and read it there, in the update near the end.

9. Here is the appended comment to my own podcast blogpost:
-- I see your site is blocking me from adding it here b/c it is too long: so I include the beginning only and suggest you go here for the full thing: http://www.stephankinsella.com/paf-podcast/kol-038-debate-with-robert-wenzel-on-intellectual-property/:

In yet another post, Understanding Scarcity with a Little Help from Ludwig von Mises, Wenzel haplessly attempts to salvage his botched understanding of the scarcity issue. Here is a comment I added, and append here as well (in part, in case the comment does not get approved):

Bob, your analysis is deeply flawed.

Consider your comments about cash flow: this shows that you think a company has a property right in the money owned by potential customers; that is what the dispute is about. But they own their money.

As the quote I provided above from Mises shows, knowledge, information, etc. is not a scarce good, not a scarce means of action. To repeat: from p. 128 of Human Action:
"A thing rendering such unlimited services is, for instance, the knowledge of the causal relation implied. The formula, the recipe that teaches us to prepare coffee, provided it is known, renders unlimited services. It does not lose anything from its capacity to produce, however often it is used; its productive power is inexhaustible; it is therefore not an economic good. Acting man is never faced with a situation in which he must choose between the use-value of a known formula and any other useful thing."
Recipes, knowledge, information, ideas, Bob, are not economic goods, that is, not scarce means of action. Mises is explicit here, and dead on.

Rather: information, knowledge, recipes play a different role in human action than scarce means do. The latter are rivalrous, scarce resources that can be employed by an actor to causally affect future outcomes so as to achieve some goal of the actor; the knowledge—of possible ends, of how to employ means, etc.—guides the actor's choice of ends, and means, but is not itself a scarce means.

Mises of course recognizes this, that information is a guide to action and plays a different role than scarce means do in the praxeological structure of human action itself. As he puts it (in my favorite of his books, The Ultimate Foundation of Economic Science:
"Action is purposive conduct. It is not simply behavior, but behavior begot by judgments of value, aiming at a definite end and guided by ideas concerning the suitability or unsuitability of definite means."
(I discuss this in Intellectual Property and the Structure of Human Action.)

This is uncontroversial among Austrians. [cont]

10. Wenzel:

"This doesn't at all damage the view that some ideas are scarce. What is my Drudge formula?"

The reason your Drudge formula can potentially carry a price is not actually because the idea itself is a scarce good. The price being paid for the formula is actually the value of a "service" from the state that it will use force against others who try to compete with you using that same formula. THAT is what is being paid for. They aren't paying for the formula itself.

You have to ask how can it be that professors, who are teaching their students knowledge that is already widely known, like the mathematics tables, able to charge a price? How can knowledge that is already well known by your own standards, carry a price with it? The answer of course is not because the knowledge of the mathematics table is scarce, it's the actions of the teacher that are being paid for. The scarce thing is the teacher's labor.

Same thing with the Drudge formula. The formula itself is not scarce. What the price of the formula signifies is the scarce labor of the state's hired goons, which is enabling you to earn more money than you otherwise would have earned had that force not been there.

IP prices are prices being paid for scarce means associated with the knowledge in terms of the benefits that comes with their use, not the knowledge itself.

Mises was right on. Knowledge isn't scarce, even if there are prices paid for knowledge TRANSFERS, and knowledge USAGE RESTRICTIONS, etc.

11. Wenzel:

"Or MIses under stood that some ideas (but not all) are not scarce."

Some ideas are scarce, but not all? Hilarious.

What makes a good scarce and what makes a good not scarce?

12. "***provided it is known***", renders unlimited services."

In other words, IS NOT SCARCE.

13. @ Ted:

"How can both IP protection and actual property right protection exist simultaneously? I submit that they cannot, because they are mutually exclusive."

Rothbard was very careful in describing how ip(I'm using lowercase from now on to make sure we aren't using current gov't framework) in the form of copyright could be achieved without violating property rights in the references I posted in the comment section here:

http://www.economicpolicyjournal.com/2013/04/hans-hoppe-issues-statement-supporting.html#comment-form

It is Stephans contention that Rothbard is/was confused(from the debate with Wenzel), although he hasn't confirmed that to me directly in the comment columns.

I have my doubts to the veracity of Stephans statement. Not only does Rothbard seem to understand the difference between copyright & patent in the excerpt I linked above...he goes on in another publication to further expound on his viewpoints via the now infamous "mousetrap" example here:

http://mises.org/rothbard/ethics/sixteen.asp

14. Nick, oh for God's sake. You people are not worth responding to. Stop talking, stick in the background like in teh good old days, think, listen, learn, and ask a humble, tentative question every now and then. Don't dare to pontificate. This is horrible. Jesus. Know your place.

15. Nick,

Keep it up. Your arguments are sound, so much so that Kinsella has chosen to attack them with his typical bluster.

16. You are seriously one of the largest pricks in the libertarian community I've ever witnessed.

It's funny that simple references/links to a well known, well liked, & well respected scholar like Rothbard gets your goat. More than funny though, it's also telling.

Get off your high horse and make an argument and stop bitching about others doing the same you jackass.

My "place" is right where it should be, behind you with my foot up your ass.

17. Nick, you've definitely provided a series of coherent, logical responses in these discussions. Keep up the good work. Kinsella's "know your place, and I fart in your general direction" arguments are exactly, as you say, "telling."

18. It seems to me that ideas can absolutely be scarce or non-scarce. The Drudge Formula example is crucial not only because it clearly demonstrates that it is scarce since people would be willing to pay for it, but also because its proliferation is limited at some number of sales.. At some unknown point, the formula would not work because so many people would be trying to use it, and Drudge would certainly alter the criteria for putting links on his page. Is this a form of rivalry? I don't know, but it is an interesting thought, which I think is important. Kinsella et al. seem to think that something like the Drudge Formula could be reproduced ad infinitum and have the same effectiveness. This is certainly untrue.

20. If the Drudge formula doesn't work as advertised, can I return it and get my money back?

1. Of course, why not? Unless the contract stipulated, no returns.

21. Is there some "correct" amount of income to which you are entitled?

1. You can prevent any use of an idea that is the result of a person obtaining because of violation of a contract.

2. On what grounds? Theft?

3. Including a third party to the contract? If you and I contract that you will not tell a third party a dark secret of mine if I tell you, and then you violate the contract by telling a third party, by the terms of the contract--and indeed all of contract theory--how can we include in any way the third party who now knows my dark secret, including collecting reparations to me? I submit that we cannot.

This is Lysander Spooner's entire argument regarding social contract. Grandfathers cannot bind grandchildren to a contract, because the grandchildren are a third party not related to the original agreement. He then argues that forcibly including the grandchildren into the contract to which they are not a party is a violation of their self-determination.

4. @ Ted Sonnier

Remember that contract is a title transfer. You cannot transfer a title you do not have. In your example, you could not collect reparations from the third party, but you could file an injunction preventing the third party from further spreading the secret, because they do not own title to the secret.

5. "You can prevent any use of an idea that is the result of a person obtaining because of violation of a contract."

What contract exists between you and I, regarding the Drudge formula?

6. Every private property transaction forces third parties into an agreement they were not party to. If I own my house, you cannot use it just because you like the house. As a matter of fact, this is one of the main arguments I get when arguing against socialists/Marxists. They proffer that I am using force against them by claiming ownership over my property.

The social contract violates my ability to own myself. I believe that's a different argument.

Also, if I lease my home to a second party, but that second party violates our contract by letting a third party use my home. I have a right to take action against both the second and the third parties (like forcibly throwing them out of my home). Just because I didn't have a contract with the third party doesn't give them an "end-around" on my property rights.

7. As to the original comment, there is no "correct" amount of income for selling so-called "real" property. Your argument is a meaningless red herring.

22. It was Mises who also said:
"A thing rendering such unlimited services is, for instance, the knowledge of the causal relation implied. The formula, the recipe that teaches us to prepare coffee, provided it is known, renders unlimited services. It does not lose anything from its capacity to produce, however often it is used; its productive power is inexhaustible; it is therefore not an economic good. Acting man is never faced with a situation in which he must choose between the use-value of a known formula and any other useful thing."

1. So what are you saying, Mises was inconsistent? Or MIses under stood that some ideas (but not all) are not scarce. Such as the language we are communicating in, English. This doesn't at all damage the view that some ideas are scarce. What is my Drudge formula?

2. Bob, you're applying a case, not something that is generally applicable. Scarcity means that something is finite, and thus limited. In order to prove that your idea is generally scarce, you have to show that it would be impossible for it to be multiplied infinitely as well as that it would be impossible for somebody else to arrive at it independently (this latter part also has implications for rivalrousness). You could surely limit this in your case, but not generally.

That I don't know your drudge formula is pretty irrelevant.

3. "What is my Drudge formula?". Fondled any ball sacs today, bobby-boy?

4. Joseph, let's be careful. The economic definition of scarcity is not finite versus infinite. Most goods, including economically scarce ones, are finite. Consider that tomatoes are finite and scarce. Consider also that breatheable air is also finite, but non-scarce. Furthermore, sunlight, as far as humans are concerned, is infinite and non-scarce. Scarcity is a function of supply and demand, where supply outpaces demand.

23. IP is one of my favorite topics these days. So, I am glad that it is getting quite a bit of attention recently. However, Wenzel, I feel that you are making grave mistakes even on simple economic questions.

First, it is not necessarily true that if something is valued that it is scarce. For instance, humans value oxygen and breathe throughout each day of their lives, but the fact of valuation does not transfer into a fact of scarcity, and thus not into a fact of property, because property only exists in scarce goods. Why does value in this case not necessitate scarcity? Because there is enough supply (breathable air) to meet the demand. This is the definition of scarcity, not the fact that something is valued; it is value relative to supply. A similar example could be sea water in certain geographical locations. Or sand.

What does command a price, due to its actual scarcity, is the medium on which the idea is transferred. This could be a CD, a book, or a teacher's body and time. These things are scarce. The ideas which are being transferred, which are valued but do not command a price due to the nature of the good itself, are not scarce. Ideas, contrary to, say, bound pieces of paper on which ideas may be carried, are near infinitely duplicable and non-rivalrous, meaning that ideas can be used at the same time without the simultaneous usage being diminished by another usage of the same.

So, it is not the case that the idea itself is commanding a price. The medium, being scarce, commands the price. However, an empty book commands a lower price than, say, a book which holds a Jules Verne novel. Doesn't this then prove that the idea has a price? No, because the two media are different goods. One is a blank book the supply and demand of which determines price X. The other is a book containing the fictional work of Jules Verne the supply and demand of which, that is of books containing competing novels (including other editions of Verne novels), determines price Y, which may or may not be higher than X. Therefore, the relative supply and demand of books containing novels (or books containing that particular Verne novel, whatever the case may be), is a separate good. The idea may cause the good to be separate, but it still does not become scarce itself, nor does it then command a price.

1. You are conflating intellectual property with the means of distributing it.

This is a common tactic among IP Communists. Nice try though!

2. If the idea were not commanding a price due to scarcity, how do you explain the difference in price should a book be sold for more than the factors (less the ideas) that took to make it? Let's say a book of blank paper commands a market price of \$5 and that same book filled with a creative genuis' market obtains a market price of \$10. How do you explain the difference? There is no other way other than to admit that the idea is a factor in the production of the good. The only way it can be considered a factor, and thus an economic good, is if it is scarce.

Scarcity is a function of the INDIVIDUAL actors valuations and subjective estimates and not of the aggregate of humanity. This is where Kinsella and Tucker have it wrong while Robert has it right.

24. As to your example of the physical albums being purchased versus the digital download of the same information, one would note the difference in price. The same price discrepancy can be noted between physical books and digital books. The reason is the relative scarcity of the media. The content itself, though it is a factor in purchase, commands no price due to its unscarce nature.

The majority of the rest of your post deals with contracts, which are agreements determining the use of physical property ("I won't disseminate idea X" is actually "I won't use my body in manner Q"). These contracts cannot create property rights in the philosophical sense based on self-ownership, because contracts presuppose property rights of this sort.

Furthermore, it is not the case that a record company (or any individual for that matter) owns, or has a right or claim to, a particular cash flow. Arguing in this manner turns the concept "theft" on its head. For something to be stolen, one must first own it. Mises discusses the nature of ownership in the first chapter of Socialism. Many advocates of IP equivocate the term "steal" to mean something entirely different.

The absurdity of IP is laid bare in the fact that not all ideas are considered worthy of protection under an IP regime. For instance, sitting was originated by someone at some point in human history. Thus all sitting must be owned by one originator; but this is not mentioned by IP advocates. However, consider the absurdity: two cavemen are standing in a cave when one utilizes his body to sit on a rock. The other caveman sees this, thinks it brilliant, and finds his own rock nearby on which to sit. The two cavemen both sit quietly for a moment, neither's sitting disturbing the other's ability to sit, when suddenly the caveman first to sit leaps up and bashes in the head of the second caveman for "stealing" his idea by merely using his own property (in this case his body and homesteaded rock). This exact situation is the one that all advocates of IP favor, thinking it both right and proper; yet, they fail to realize that it is inherently violent and completely un-libertarian in its disrespect for real, tangible property.

The fact of the matter is that protection of "intellectual" property and real, tangible property are mutually exclusive. One cannot claim to advocate for consistent property rights while simultaneously carrying the banner for IP. The enforcement of IP infringes on the enforcement of real property rights based on self-ownership.

1. IP proponents seem to believe in the contradictory notion that one can sell something yet still maintain ownership over it. They want to pretend they are selling you a good, then after you've given them money for it, they want to tell you how you can use it or badger you for more money for different uses.

Witness the hypocrisy of the movie business when they advertise a new DVD for sale: "OWN IT TODAY!" the ads always blare. But what they really mean is "GIVE US MONEY FOR THE LICENSE TO WATCH THIS MOVIE IN YOUR HOME (BUT NO OTHER "REGIONS") TODAY! AND MORE MONEY IF YOU WANT TO DO ANYTHING ELSE WITH IT, BECAUSE EVEN THOUGH WE SOLD IT TO YOU YOU DON'T ACTUALLY OWN IT!"

2. If you take my pencil, even though it is theft, I'm probably not going to hunt you down and kill you; it's just not worth it for the relatively minor infraction. The same holds true if I catch you in my back yard (although it could escalate to violence if you refused to leave upon my command to do so). That doesn't mean I don't own the pencil or my back yard.

Just because some ideas don't have enough value to fight over doesn't invalidate the idea of IP.

3. Unknown 2:34pm,

You are using tangible goods and then attempting to equivocate. Stop it. Ideas cannot be owned due to their inherent nature as being non-rivalrous and non-scarce. The reason there is property at all is because in the realm of tangible objects, there is scarcity and economic rivalry.

4. Ohhhhhhhhh. I get it now. IP doesn't exist because Ted asserts it to be so.

5. This whole thing started when Robert talked about "designed rights." He is correct. Property rights are axiomatic entities. They are defined by humans to allow commerce in the defined rights.

If you eliminate IP, you will have the same problem that you have when you tax away all profits on tangible items. yYou'll remove incentive to create intellectual content just like the taxation removes the incentives to create and/or trade tangible property.

25. Robert,
Why do we need (private property) rights?
What is your argument for private property rights? (Natural law, Hoppe Style,...?)
I assume you consider intellectual property (formula or whatever) a private property right; what is your definition of private property right?

1. No need for private property at all... If you're a Communist.

26. By the same token, the enforcement of property rights in some (physical) things infringes on the enforcement of property rights in other (physical) things. Suppose the discussion wasn't about whether ideas can be property but whether land can be property. Suppose I am arguing in favor and you are arguing in opposition.

Suppose your cattle grazes on what I consider to be my land. I chase them off and in the process some of the beasts are injured.

Upon discovering the injuries, you angrily confront me. "You attacked my cattle! You cannot let your belief in fictional land-property rights justify aggression against cattle-property rights, which is what we already agree on. Since you cannot protect your land without attacking my cattle, the idea that you can own your land is nonsense to begin with."

Now, your argument against IP is this: "Since you cannot protect your IP without attacking other people's physical-property rights, the idea that you can own ideas is nonsense to begin with."

Both arguments are flawed. You cannot use a principle of law that implies land cannot be owned, to derive the conclusion that land cannot be owned. Likewise, you cannot use a principle of law that implies that ideas cannot be owned, to reach the conclusion that ideas cannot be owned. Circular argument.

1. This comment has been removed by the author.

27. It is not circular because the argument is made from the standpoint of libertarianism, which takes a position on self-ownership, and thus property in physical, scarce things. One cannot from the standpoint of libertarianism argue in favor of both IP and property in real goods as this would lead to contradiction. To be a consistent libertarian, that is to be a consistent advocate of property rights, one cannot advocate also for intellectual property rights without being mired in contradiction.

"This whole thing started when Robert talked about "designed rights." He is correct. Property rights are axiomatic entities. They are defined by humans to allow commerce in the defined rights.

If you eliminate IP, you will have the same problem that you have when you tax away all profits on tangible items. yYou'll remove incentive to create intellectual content just like the taxation removes the incentives to create and/or trade tangible property."

28. "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)?"

Hertz's right to forcibly retrieve the car is not based on the car being an economic good acquired through broken contract. It is based on the car being Hertz's property.

Consider the same argument by analogy in the absence of a contract; D drives the car away without permission. Hertz may forcibly retrieve the car from D or anyone he transfers it to. Now, X observes W's actions and thereby divines the formula without permission. Applying precisely the same argument by analogy, W may forcibly stop X from using or selling the formula, and W may go to anyone to whom X has already sold the formula and forcibly stop them as well. Unless this conclusion is accepted then it must be the case that this argument by analogy is fallacious.

Furthermore, accepting the idea that 'downward pressure on prices' constitutes damage deserving of reparations is problematic.

29. Excellent counterpunch, Bob. Like many, I initially thought Kinsella had you on the ropes, because you got sidetracked with the namecalling and became overly emotional, thus never getting around to most of your points.

Kinsella's argument rests on two premises. The first premise is that scarcity is defined by rivalry (consumption by one consumer prevents consumption by another consumer). This is simply not true. As you correctly point out, scarcity is defined by DEMAND. Take the example of 10 people on a first boat. The captain of a second boat comes along and offers the 10 people a ride on his boat for \$100 each. They tell him to beat it, since they have their own boat. Now the first boat hits a rock and starts to sink. The captain comes back and again offers them a ride for \$100 each, which they will not happily pay so they don't die. All 10 people are able to consume the boat ride, thus the boat ride is not a rivalrous good. But it is certainly scarce!

Kinsella's other argument is that third parties cannot be held to a contract they did not sign. So if A gives a copyrighted work to B, that means B has conditional ownership of B, which does not allow B to copy the work. If B gives the work to C, C does not acquire the right to copy the work, because B cannot transfer an ownership right to C that B did not have. This is your Hertz example and it is also the view held by Rothbard.

Also, the arguments that IP is not enforceable are not relevant to the discussion at hand. We are trying to establish whether copyright is JUST, not whether it is practical.

Finally, I am surprised that no one has mentioned this pro-IP article by the Austrian professor Cwik:

http://mises.org/journals/scholar/cwik3.pdf

1. Cwik's argument is so shoddy and pathetic that it is almost as bad as Wenzel's, and not worth any more time than people have already spent demolishing it.

2. @Kinsella: Ah, the "I fart in his general direction" argument.

3. @ Stephan Kinsella

I found Cwik's arguments well thought out and interesting. I would like to see an actual response from you to his paper, or please point us to someone else that has written a response. Hopefully the response you point us to is better than this one:
http://www.againstmonopoly.org/index.php?perm=643

30. Bob, you are confusing the difference between the MEANS to acquire knowledge and the knowledge itself.

The reason X is willing to pay you for the Drudge formula is not because the knowledge itself is scarce, but rather because the means to acquire that knowledge is scarce.

Take the example of a dictionary. You have conceded that the English language is not a scarce resource, so why (beyond the physical properties of the media itself) would anyone be willing to pay a price for a dictionary? The answer is that the dictionary itself is a scarce means of acquiring knowledge. The dictionary is scarce because my use of it prevents someone else from simultaneously using the same dictionary. However, this does not mean that the definitions inside the dictionary are scarce resources. My knowledge of the definition of the word "idiosyncratic" deprives no one else in the world of that knowledge. The number of people who could have knowledge of the word "idiosyncratic" is potentially unlimited precisely because it is not a scarce resource.

Now back to your Drudge formula. Person X is willing to pay you money to acquire knowledge of the Drudge formula because you are, at this point, the only MEANS of acquiring it. Now let's say that, one way or another, more people have learned the Drudge formula and there are now more means one can use to obtain knowledge of this formula. Has the supply curve for the Drudge formula itself shifted? Of course not!! There is only one formula, the supple curve (assuming it exists at all) is a straight vertical line, it can never change. However the supply of MEANS has increased, meaning that it is YOU, the MEANS used to learn the drudge formula, which has lost value not the actual formula itself.

31. I'm glad your finally acknowledging that Kinsella was using the term scarcity differently from you. However I notice that you don't actually say what his definition is. You lay out your definition, give an example of something that is scarce by your usage of the word but not by Kinsella's usage, and then simply assert that Kinsella's usage is wrong. But this is still equivocation; Kinsella's argument is based on the meaning he was using of the word and it is not valid to present a different meaning of the word, show that that usage does not have the same implication, and conclude that the argument based on the other meaning is incorrect.

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33. An idea cannot be property because it is a pattern of activity in a mind. It is absurd to suggest that one person owns a pattern of activity in another person's mind. Revealing that idea is a service and that is what is being traded for a fee in Mr Wenzel's example. The buyer is not "taking" title to a thing, he is purchasing a service.

Psychology is not a science, since no one can prove the contents of another person's mind. Novelists can write about the thoughts of their characters, but out here in reality, the only mind we know is our own. Building stories about what ideas are in whose mind and how they got there is not a valid process for deciding who owns what.

34. I'm sorry this is quite a long thread and someone may have interjected this, but is \$0 a price? And if so could that not add even more weight to the Kinsella side of the argument?

1. So, if I give you a pencil for \$0, it invalidates the entire concept of private property?

35. I’m not sure why so many libertarians have a problem understanding scarcity but if we ignore scarcity for a moment what in natural law gives a person the right to use violence against everyone else in the world that happens to have the same idea in their head, regardless of how that idea was acquired. Ideas are more often than not, realized by many people independently from each other. If two people have the same idea on different planets why does ONE get to use violence against the other? And what idea can be owned and which ones cannot be owned. Is there an objective definition for what can and cannot be owned? Can the letter “A” be owned by someone and if so can he then extract retribution from everyone who uses that letter? SO it has to have some complexity before it can be owned what is that complexity quotient to objectively figure out what can and cannot be owned? And where does the time limit for ownership come from in natural law

IP is just another way to use government to grant monopoly’s. IP cannot and would not exist in a world without government. What entrepreneur would include the cost of clubbing everyone in the universe that has the same idea? It would soon die out as an idea because it cannot be supported without massive subsidies from a collective that gets its funding through theft and murder.

1. How many people simultaneously wrote "The Wealth of Nations"?

36. Sorry if this has been answered in the past, but is \$0 a price? And if so - does that add weight to Kinsella's argument?

(I'm trying to remember if \$0 is called ...totally inelastic or something)

37. “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.”

Yes. We all agree with this. A car is a physical good. But how exactly do you take back a formula?

“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)?”

Even he could stop Z from selling the formula, how is he going to stop all the other people from using the formula acquired from Z? It seems like this would be a never ending game of Whac-a-Mole. So how much money do I owe to the Einstein estate for using the formula E=MC^2?

38. Last night, I discovered a formula that will guarantee to get an article on DrudgeReport. I published it online under the GNU GPL.

1. GNU GPL relies very heavily on the idea of IP. Perhaps you should actually read it.

39. "In Human Action, Ludwig von Mises writes:
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."

He said "commodity." This statement only applies to commodities. IP is not a commodity. This is why Mises is not inconsistent by saying:

"A thing rendering such unlimited services is, for instance, the knowledge of the causal relation implied. The formula, the recipe that teaches us to prepare coffee, provided it is known, renders unlimited services. It does not lose anything from its capacity to produce, however often it is used; its productive power is inexhaustible; it is therefore not an economic good. Acting man is never faced with a situation in which he must choose between the use-value of a known formula and any other useful thing."

40. Sorry, I think I was unclear in my earlier question. I'm not concerned about the mechanics of enforcement. I'm more concerned about the *right* to enforcement.

I think we can both agree that any enforcement is an act of aggression. The only issue is whether that aggression is justified or not and, of course, under NAP, enforcement can only be justified if the enforcer is retaliating against an initial act of aggression.

Consider this case: (borrowing from my earlier story), Mr Wenzel contracts with Mr Kinsella to tell him about some idea and Kinsella agrees not to tell another living soul. Mr Kinsella violates that agreement and tells Dr Murphy. This time, Dr Murphy has been taken hold by the devil and immediately begins trading on this information.

I understand that Mr Wenzel can justifiably aggress against Mr Kinsella because Mr Kinsella threw the first punch, as it were. My question is this: What is the rationale can Mr Wenzel justifiably aggress against Dr Murphy? I think the answer must stem from first-principles, namely the NAP

41. If the government convinced everyone it was a good idea for everyone to pay a fee for use of the air and some people fell for this and payed would that mean that air is indeed scarce?

42. Bob, I want to know if you still think that by supporting "copyright" Rothbard supported something other than contractual arrangements.

43. While still incorrect, this post is much more coherent than anything you presented during the debate. You wouldn't have appeared so ill-prepared had you presented something like this post.

1. You just weren't listening during the debate, the points were made. Don't worry, I am having the debate broken down into small segments so that what Kinsella said can be examined in detail.

2. So are you saying that you brought up this Mises quote in the debate?

3. You're just now fleshing out your argument with all these blog posts. If you had done that before the debate, like you should have, it would've made for a much better debate.

44. From reading many of the anti-IP comments, it appears you all live in some theoretical world. I was hoping there would be more real world dialog. J

Jeez folks, if there are basic economic considerations in play such as supply, demand, price, value, etc., the good, service, or idea has some degree of scarcity associated.

Can't both sides agree on this as a basic assumption and move on with a common law / natural rights/ contract law solution without government? I believe Rothbard and others have covered the use of private courts.

45. I'm going to get a T-shirt made that says: "What is my Drudge formula?"

46. Without weighing in on the overall IP debate, I did have a couple of thoughts on scarcity I wanted to suggest as it relates to intellectual property.

1) Assume I have an original idea that is of the kind we might consider intellectual property. Unlike other physical goods that are undeniably scarce, I cannot consume intellectual property. I can use it again and again without ever diminishing supply of the good in any way. Any physical good, when consumed, cannot be consumed again. Intellectual things do not have this characteristic, so that kind of scarcity is not apparent.

2) Physical goods are also scarce in that they can ONLY have one owner or else are not owned at all. Intellectual property, if shared between friends for instance, can by fully owned by two or more people. That is, one and the same thing (the intellectual good) is simultaneously and mutually owned by more than one person at the same time. This is not a case of the good being replicated and two copies of it being owned -- by its very nature it is in fact just one thing owned fully by more than one person. In this sense, intellectual goods also seem not to conform to a normal sense of scarcity in that it's possible to have more than one owner of the identical thing.

Other thoughts on scarcity have been discussed, but those two considerations I haven't seen discussed yet. Also, I would love to see more around the enforcement theory spelled out for this - I don't think the enforcement angle should play a role in defining whether or not Intellectual Property exists, but it is interesting in terms of how things would work. I see the enforcement side, as a practical matter, as being totally unworkable. Again, this doesn't mean intellectual property doesn't exist, it's just a question of what we do with it if agreed that it does exist.

47. I don't have the patience to read everyone here. But as far as whether or not the formula is scarce is moot. Regardless of the contract between parties 1 and 2, once the third person knows the formula, he cannot simply unknow it, it is his property now. He can do as he likes with it. This includes selling or widely spreading it. And as for party 2, once he knows it, contract or not it is also his property. And much like rothbard said a man can't sell himself and be forced to be held to any contract about his self ownership, the same thing applies to his knowledge.

48. How does being held to a contract about ones use of an idea which simply becomes knowledge, and being held to a contract about self ownership, like if I sold myself as a slave differ? Rothbard argued no man can be held to that contract and you're all pretty intently holding to his ideas.