Saturday, September 22, 2018

America, The Independent Republic

Stuart K. Hayashi

“We have it in our power to begin the world over again.”





“CapitalistPig” Jonathan Hoenig edited and published the anthology A New Textbook of Americanism. It features the original Textbook of Americanism, a series of essays in question-and-answer format that Ayn Rand wrote to explain the individualist principles upon which the republic was founded. Ayn Rand was not able to complete the entire series, but she wrote out a list of the remaining philosophic questions she had intended to answer. For the remainder of A New Textbook, Jonathan and other Objectivist scholars have taken it upon themselves to answer those remaining questions, both according to their own knowledge of the subjects and also according to how they think Ayn Rand might have answered. I have assisted Jonathan in the editing and contributed an answer to the question “How to identify a Nazi?”

The online conservative periodical The Resurgent has published an op-ed from me on this topic that is adapted from the book, “What’s the True Meaning of Americanism?”

Previously I have written that, on account of it being founded on principles of openness and on rewarding individual businesses for their merit, regardless of their country of headquarters — prioritizing such individual merit above collectivist nationalist and ethnic considerations — America is and always has been “the globalist republic,” in the best possible meaning of globalist. I stand by that, and in the op-ed, I add another layer: America was founded as the Independent Republic. I say,

In his first draft of the Declaration of Independence, Thomas Jefferson wrote that “all men are created equal and independent...” In keeping with the burgeoning philosophy of its time, the Age of Enlightenment, this draft declared independence in a respect even more significant than independence from Britain: that each peaceful adult is independent in how he is to navigate his life. In more context than one, then, America was always to be the Independent Republic. This idea came to be known in the late nineteenth century as the spirit of Horatio Alger, and what twentieth-century historian James Truslow Adams later dubbed “the American dream.”

Not only is it possible to be both an independent individualist and an economic globalist, but to describe oneself as both is to be redundant.

A parochial collectivist — an economic nationalist — will demand that his fellow countrymen purchase goods or services primarily according to whether it benefits other members of their ethnicity or some other group designation in which they had no choice in joining. The parochial collectivist and economic nationalist expects that his countrymen prioritize this over their individualistic freedom to purchase peaceably whatever good or service best serves their individual needs.

By contrast, the independent individualist prioritizes the satisfaction of her own individual needs, and knows that maximizing the opportunity of completing this task requires that she have the freedom to purchase such goods or services from any peaceable vendor from anywhere, including vendors who are not of her race, sex, or cultural background.

I thank Katherine Revello, who maintains the Politics of Discretion weblog, for pointing out to me that Jefferson’s original draft of the Declaration of Independence said that “all men are created equal and independent.” The Declaration remains beautiful and important, but its meaning would have been even clearer if that independent had been kept in the final version.

Yes, America is the Independent Republic — not only independent from a colonial master, but the republic wherein the independent individual has the freedom to thrive, doing business with other independent individuals throughout the world.

Sunday, September 16, 2018

Progress Hindered Not By ‘Slave Morality’ But By ‘Caveman Ethics’

Some Emotional Biases That Might Have Helped Our Hunter-Gatherer Ancestors Procreate Are Not So Helpful to Us — But This Can Be Overcome



Stuart K. Hayashi




A major problem in the world is not what Friedrich Nietzsche dubbed a “slave morality,” but what I call “caveman morality” or “caveman ethics.” Before I address these matters more fully, I must issue some caveats.

First, slave morality was always a creepy expression, as it has been used to denigrate slaves much more than their masters. The idea is that because the master dominates the slave, that means the master is strong and the slave is weak. And no one wants to be weak. When someone says you follow a “slave morality,” it is to demean you as weak, just as a slave is presumed to be. But the slave’s efforts feed both the slave and the master; the master here functions as a dependent on the slave. Qua this arrangement, it is the slave who is stronger and more admirable, and it is the master, not the slave, who should feel abased. A code of ethics that condones coercive domination over others is much more shameful than a “slave morality.”

The real scourge is “caveman ethics,” but I must provide a disclaimer about the extent to which caveman can be taken as a pejorative in this context. There is nothing inherently bad about cavemen. We owe much to them, insofar as they practiced ingenuity that later generations built upon, and which continues to benefit us to this day. As I shall explain below, though, we benefit today not by the extent to which cavemen acted upon their collectivist cognitive biases, but by the extent to which some relatively psychologically independent cavemen and -women advanced technological progress by defying the social collectivist norms of the very clans and tribes from whence they came.



Life During Over 89 Percent of Our Species’ History
This is the situation. Compared to the span of most of human history, our life in industrial civilization — in republics bound to constitutions enshrining the rights of the individual — is very new. That is the past 300 years, compared to humankind’s lifespan that exceeds one million years. Even our living in cities and practicing agriculture as our main source of food is a relative blip. Life as hunter-gatherers constitutes over 99.5 percent of the history of members of the genus Homo, and constitutes over 89 percent of the history of our own species, Homo sapiens sapiens. The extent to which industrialization and liberal republican politics have changed the human habitat both geographically and socially is enormous, whereas the extent to which human physiology has changed is comparatively minuscule. And included in that “human physiology” is brain chemistry.

We do not dress like cavemen; we have technologies that were not at their disposal. But, to a large extent, we have inherited cavemen’s cognitive biases, which were often socially collectivist. This is because, over the course of 89 percent of the history of Homo sapiens sapiens, environmental pressures “selected” for the human clans’ possession of emotional tendencies toward social collectivism, usually weeding out independence and rendering independent-minded persons a rarity.

By contrast, whereas psychological independence is very important for modern life in an industrialized, more-liberal republic — the most successful entrepreneurs succeeded largely as a consequence of their psychological independence — the modern environment has not weeded out any genes within individuals that might have imbued them with psychological biases toward social collectivism. This is for several reasons. First is that this new environment is fewer than 500 years old, which is much less time than the million years it took for the propagation and establishment of genes that might have imbued our ancestors with emotional biases in favor of social collectivism.

Secondly, as a very consequence of the innovations sired by individualists such as George Westinghouse, the mortality rate overall has declined, across the board, for people in the industrialized, more-liberal republics. If a man is born with an emotional predisposition toward social collectivism, and, more importantly, chooses to act on those predispositions, the more-liberal republican, industrialized environment has still made it unlikely that such a man will die before he has had his own children and reared them to adulthood. And since that collectivist man’s children have inherited his genes, they have likely inherited whatever genes might have encouraged their father to have an emotionalistic, cognitive bias in favor of social collectivism.

Of course, as natural selection has also imbued every member of our species with volition (that is, free will), it does not follow that this man’s children are programmed to let such emotionalistic, pro-collectivism cognitive biases control them; they can choose to think over matters and override any such emotionalistic, pro-collectivism cognitive biases. But anyway, this is the set of circumstances that we have been dealt: as a default, people often fall back on the emotionalistic, pro-collectivism, cognitive biases of their ancestors.



Not “The Reptilian Brain” But “The Caveman Brain” 
We can think of it this way. Pop psychology writers often say that if you act on impulse, you are succumbing to “the reptilian brain.” The idea is that our reptilian ancestors always sought immediate gratification, and therefore, when we do the same, we are falling back on a default we inherited from our reptilian ancestors. That expression is quite misleading, as the ability of lizards to learn and process their percepts is more complex than that. Bearded dragons experience deep sleep, which suggests they might dream — just as mice and cats do — and they learn new skills through observation. But here I will employ a concept similar to “the reptilian brain.” When people go with socially collectivist “tribal loyalties” mindlessly, rather than examine a matter, and when they immediately come to some fallacious conclusion that seems obvious but which is refuted by empirical evidence and economic science, such people are falling back on a default they inherited from their collectivist hunter-gatherer ancestors. That is not “the reptilian brain” but “the caveman brain” or “caveman psychology.”

For a person to be guided by his “caveman brain” in matters of social ethics and political economy is highly problematic for two reasons:   1) it is mismatched with the modern environment, which is more psychologically individualistic, laissez-faire liberal, and industrialized, and 2) all the progress and advances of the modern world — the aforementioned psychological individualism, laissez-faire liberal republicanism, and industrialization — were themselves the result of our bravest forebears triumphing in psychological independence as they overrode “the caveman brain” both within themselves and the people around them.



What Environmental Circumstances Encouraged Social Collectivism Among Our Ancestors?
Our hunter-gatherer ancestors lived through a process that William Donald Hamilton dubbed “kin selection.” This means that an intra-species competition for food and other resources does not pit one individual against other individuals, but a family unit against other family units. Charles Darwin gave the example of insect colonies and hives. An ant colony is a single family unit. Worker ants and soldier ants are sterile throughout their lives, but insofar as they contribute to the physical well-being of the queen and the males with which the queen mates, those worker ants and soldier ants will contribute to the hatching and proliferation of family members who share their genes. Hence, although a worker ant does not itself lay any eggs, a worker ant acting in accordance with its assigned role shall help that worker ant propagate its own genes indirectly.

Hunter-gatherer clans were not so regimented, but a similar phenomenon was at work. Human beings lived in clans in which most of the clan’s members were genetically related; there was no distinction, at that time, between “family” and “village”; “family” and “community” were the same. Even if a man died before ever having sex, if he did something that contributed to the continued existence of the clan as a whole — if he helped save other clan members in battle — then, as long as other members of his clan survived and reared their own children into adulthood, that man would still be propagating his own genes via an indirect means.

Rev. T. Robert Malthus’s theories about population pressures did apply to nomadic hunter-gatherer clans. They traveled around a continent consuming resources and did not replenish those resources. If the number of nomadic hunter-gatherers got too large, they would reach a point where there was not enough food or other resources per capita, and there would be mass starvation. Hence, clans (and, later, tribes) would go to war against one another for land and other resources. These environmental pressures encouraged an “us-versus-them” mentality in possibly two ways. As this process went on for over a million years, it is conceivable that the family units/clans that survived and propagated themselves were the ones possessing genes that emotionally predisposed the genes’ carriers toward having, as their psychological default, a socially collectivist, “culturally chauvinistic,” us-versus-them mindset.

Moreover, this mindset would also be transmitted and enforced culturally — if this bias was not the default, the clans that survived and perpetuated themselves would still be the ones that chose to inculcate such social collectivism among its children; any such children who grew into adults and survived various wars would transmit those ideas to their own children. For such reasons, for most of human history, “us-versus-them” was the default and norm, and almost all people considered it obvious that economics and wealth were a zero-sum game, in which one person having more wealth and resources necessarily meant there was less wealth and fewer resources available for everyone else. The psychological tendency to believe, as a default, that survival and eating and resource-accumulation are a zero-sum game is a tendency that modern human beings might have inherited biologically. And this belief was definitely taught and transmitted culturally for over 89 percent of our species’ existence. Samuel Bowles of the Santa Fe Institute dubs this mindset “parochial altruism, a predisposition to be co-operative towards group members and hostile towards outsiders.”

Also note that such clans were small. Robin Dunbar points out that such clans seldom had over 250 people in them. Because the clans were so small, it was common for someone to have regular, personal, face-to-face interactions with other members of one’s own community. The idea of treated someone from one’s own community “impersonally” was still alien to human beings. A human being could only be “impersonal” toward someone from outside of his clan. The impersonality was not always confined to enemies in wartime. In times of relative plenty, separate clans would trade with one another rather than battle, though the modicum of trust between these clans were fragile. In such a case, a trading partner from a separate clan would not be condemned as an outright enemy, but instead regarded impersonally as someone neutral. Temporary allies and trading partners were still regarded as being from the outgroup, not the in-group.



The Newer, More Individualistic, Positive-Sum Environment
Of course, the human species was not always doomed to a life of inter-clan warfare over food resources. What changed matters was the invention of agriculture and then the adoption of farming grains as the main source of food. Crops were the first natural resource that human beings learned was renewable. As noted by Jean-Baptiste Say and Julian L. Simon and Ronald Bailey, it is not the case in a free-market economy that human beings are doomed only to deplete natural resources until nothing is left.

In the process of producing units of output to sell, an entrepreneur needs inputs — natural resources, human labor to convert those natural resources into units of output, and tools for the laborers to use in that conversion. And the tools themselves were crated from prior exercises of entrepreneurship in which the entrepreneur managed and instructed laborers in converting natural resources into those tools. The entrepreneur must trade away some of her own wealth to acquire those inputs of labor and natural resources; using up many inputs imposes a cost on the entrepreneur that eats into her profits. Hence, the entrepreneur can downsize her costs — and thereby upsize her profits — by devising ingenious methods of producing more economic value in her units of output even as she uses up ever-fewer and ever-smaller inputs of labor and natural resources to do so. As an example, in the year 1900, to took ten pounds of coal to light a 100-watt light bulb for an hour; by 2002, it took only one pound of coal to perform the same task. Ronald Bailey gives other examples.

Since the 1970s, the weight of the average car has fallen by 25 percent. Food cans are 50 percent lighter than they were 50 years ago. A flexible plastic pouch that replaces a steel can reduces the packaging weight by 93 percent. Plastic soda bottles are 30 percent lighter than they were in the 1970s — which were already much lighter than the glass ones that preceded them. Similarly, plastic grocery bags are 50 percent thinner than they were 20 years ago and lighter than the paper bags they replaced. 

The empirical data evince that trading under freedom is a positive-sum game. But when people do not bother to think about this, they default to the emotionalism of “the caveman brain,” which presumes that one person getting richer inexorably spells that everyone else is getting poorer.

In New Scientist magazine, Graham Lawton elaborates on how Donald Trump’s demagoguery against free trade and immigrant laborers gets such a strong gut reaction from so many people:

Zero-sum thinking was an evolutionary adaptation to a time when we lived in small bands of hunter-gatherers, says neuroscientist Dan Meegan at the University of Guelph in Canada. Under those circumstances, resources such as food and mates were finite and often scarce, so more for one person meant less for another. Today, however, things are different. 
A good example is international trade.... People find it hard to believe that a trading “win” for a foreign partner doesn’t lead to a loss for them. This is one reason why free trade is politically unpopular among people it would benefit.

It was when human beings switched to farming grains as their main food source that they also began to form large cities. This was when people began to live in relatively small households within such a city. On a cognitive level, they began to make a distinction between “family” and “community,” and also a distinction between “member of my family” versus “member of my community.” However, because of the emotional predispositions that these city-dwellers had inherited from their nomadic hunter ancestors — and remember that the nomadic hunter lifestyle comprised over 89 percent of humanity’s history — these city-dwellers still did not always distinguish “member of my family” from “member of my community” on an  emotional level. This is why, although city-dwellers have come to view strangers in their community much more impersonally, they can develop an emotional bond with someone from their community who is not closely related to them genetically. It is also why sometimes someone can develop a stronger emotional attachment to a friend or coworker than to an uncle or cousin.

Because so many emotional predispositions remained the same, the hunter-gatherer’s emotional bias toward the sentiment of “sacrifice for the family/clan” became the city-dweller’s bias toward the notion that the moral ideal is for the individual’s well-being to be sacrificed for the ostensive well-being of the community as a whole. The idea that the individual’s rights are less important than the purported welfare of “the larger community” is something inherited from “the caveman brain,” and it is the modern manifestation of “caveman ethics.”



“Gorilla Kidnaps a Woman,” 1887,
by Emmanuel Frémiet.
Source: Wikimedia Commons.
As long we retain our 
hunter-gatherer ancestors’ rudi- 
mentary  interpretation of ethics, 
we are  held  captive  by 
ancient  hominids.
How the Caveman Brain Remains — And How Some Want Us to Be Held Captive By It
As I have argued elsewhere on this blog, it is the peaceable egoism of entrepreneurs — acting under the relative freedom of a more-liberal republic founded on the principles of individual rights — that should be thanked for reducing the mortality rate, lengthening and improving human lives. But again, this is mismatched against the notion of warring nomadic hunter-gatherers that some peaceable self-interest is morally neutral at best, and that what deserves most esteem is sacrifice of the individual for the clan.

As I have written here before, many evolutionary-psychology promoters such as Eric Michael Johnson proclaim that just because our warring nomadic hunter-gatherer ancestors considered that the ethical norm, it follows we that we modern industrial republicans should as well. This assumption on the part of Eric Michael Johnson and his ilk is ironic in that, exactly because psychological individualism and liberal republicanism and industrialization have advanced us so far, the same population pressures that influenced our hunter-gatherer ancestors to regard collectivist self-sacrifice as the ethical norm are circumstances do not even apply to us. This insistence on clinging to collectivist self-sacrifice as the ethical ideal is itself a default to “the caveman brain,” and a clinging to “caveman ethics” that are, at best, obsolete.

That human beings are still influenced by “the caveman brain” helps explain the following:

  • Why many people regard their favorite TV celebrities — no matter those celebrities’ ignorance about health science — as more trustworthy experts on human health than actual scientists are.
  • Why many people find it easier to believe, fallaciously, that the summer 2007 financial crisis was deliberately caused by a tiny cabal of “globalist” billionaire bankers who conspiratorially control everything, rather than accept what actually happened: the crisis was the mostly accidental result of large, bureaucratic, impersonal institutions having difficulty in communicating data accurately to one another.


Conclusion
I won’t go over all those explanations in a single blog post. But suffice it to say that human beings still defaulting on their “caveman brain” will lead them to cling to the sort of primitive interpretation of ethics that their caveman ancestors held. And this is a dilemma because those outmoded interpretations about ethics give people a very misleading impression about what happens in modern life; this is what leads them to misinterpret the very same peaceable global trade that has lengthened and sustained their lives and their family members’ lives as some evil that has harmed them.

Again, this is not a discounting of free will. One can refrain from being misled by the cognitive biases of “the caveman brain” by being aware of them and, when coming to a decision, rationally considering whether the emotion-driven biases from “the caveman brain” match up with the data and the principles of nature, including the principles of economics. Through our own free will, it is thus our task to educate our fellows about the perils of being controlled by “the caveman brain” and unthinkingly following “caveman ethics.”

Saturday, September 15, 2018

In Remembrance of Corey Baum

Stuart K. Hayashi

We missed Corey at OCON 2018, and we will continue to miss him, always.


Corey Baum started the In-the-Closet Objectivists podcast with Dr. Meghann Ribbens. The admittedly strange title came from the place from which they first broadcast the show: it was a space so enclosed that it was if they were in a closet. Over time, they came to joke about the irony of the title, as they made no secret of their philosophic convictions. Months later, I was honored when they invited me to join them as a co-host.

Corey passed away last night. He was a highly spirited, good-humored man; he loved to debate, and he debated with passion. In the relatively short duration through which we got to know each other over BlogTalkRadio, we had laughs and discussed our favorite movies. He encouraged me to talk matters out, many times having more confidence in me than I did. My heart goes out to his wife and daughters; his family lost someone great. His wit and wisdom will be long remembered and cherished.

Sunday, September 09, 2018

Trump Is Involved in a Witch Hunt, But Is Not on Its Receiving End

Stuart K. Hayashi





When most people say the word monster, they usually do so as a synonym for “ugly” and “evil.” But if you have glanced upon the drawings I have put on the World Wide Web, you have probably noticed that I don’t share that perspective. I draw monsters because they are beautiful and good. And yet this time I did decide to draw a phenomenon I consider to be ugly and evil.

The specific image of “being burned at the stake” is metaphorical, but — in the greater abstract — government-inflicted violence toward undocumented immigrants is something happens literally. Governmental decree is ultimately enforced at gunpoint, and that applies to deportations. Deportations are carried out by armed federal agents; this is armed force just as when a mugger sticks you up.

Between 2010 and 2016 the U.S. Border Patrol agents fired bullets into 33 would-be immigrants, ending their lives. In 2014, James Tomsheck, the chief of internal affairs at the U.S. Immigration and Customs Enforcement (ICE), was fired by the agency for having investigated 28 of those deaths and ascertaining that at least seven of them were likely under circumstances where deadly force on the Border Patrol’a part was unjustified. That trend continued into the Trump administration. On May 23, 2018, Claudia PatriciaGómez González — a 19-year-old Guatemalan — got into an altercation with a border agent in Rio Bravo, Texas, and was shot dead as well.

And, once the immigrant has been deported, the violence does not end for him or her. In too many deportation cases, border agents are knowingly sending immigrants back to environments dominated by gang warfare and high murder rates. Steven Sacco writes,

One study found that between January 2014 and September 2015 eighty-three deportees who were sent back to Honduras, Guatemala, and El Salvador were murdered after their return. They were people fleeing the killers who eventually took their lives. People like José Marvin Martínez, who fled violence in Honduras and made it to the U.S. when he was 16, but was deported and four months after his forcible return was shot to death. Or Juan Francisco Diaz, also deported back to Honduras, where he too was murdered a few months later. Or Giovanni Miranda, who, after spending most of his life in the U.S., was deported to El Salvador to be murdered in front of his wife and son in June 2015. Or Edgar Chocoy, 16, who ran away from a gang to the U.S. only to be murdered by that same gang seventeen days after he was deported back to Guatemala in 2004. Or an unnamed teenager who was shot to death hours after being deported back to San Pedro Sula, Honduras. Moises, 19, was murdered after he was deported to El Salvador. And there are too many more names we’ll never know. 
What’s more, the number of deportees delivered directly to their killers does not include those who survive attempted murder or other violence because of their deportation — a number no one knows. Isais Sosa, who was 19 when the Los Angeles Times covered his story in 2014, survived being shot by a gang days after his deportation. The 19 year old daughter of Dora Lina Meza fled to the U.S. from the same gang that, after she was deported back home, raped her at gun point. After Juan Ines Alanis was deported he was kidnapped and held for ransom while his fingers were smashed with a hammer.

Governmental action, as it is backed by violent threats, is justified when it is in retaliation against some party having initiated the use of force against a person or her private property. But most undocumented immigrants are peaceful, having violated no laws unrelated to their having arrived into the USA without a license (and such licenses, visas, are ridiculously difficult to come by, involving even more red tape than what small businesses have to face). These undocumented immigrants are individuals who must be judged on an individual basis. As observed by the family of murder victim Mollie Tibbetts, to paint undocumented immigrants in general as violent is demagoguery and scapegoating; that is the witch hunt.

It is for this reason that I don’t say “Politicians are the real monsters.” That would be employing monster as a pejorative and a reproach, which I am not about to do. Monsters, such as the one created by Victor Frankenstein and the titular Beast from Disney’s Beauty and the Beast, are weird outcasts — and that is how undocumented immigrants are still too often treated. Now, as before, someone must stand up for the weird outcast.



Sunday, September 02, 2018

Zuckerberg Built That

Stuart K. Hayashi

Philip Rearden: “They pursue a ruthless, grabbing, grasping, antisocial policy, based on nothing but plain, selfish greed. [...]” [...]  
Hank Rearden: “Philip, say any of that again, and you will find yourself out in the street, right now, with the suit you've got on your back, with whatever change you've got in your pocket, and nothing else.” [ . . . ] 
Philip: “But don’t I have any freedom of speech?” 
Hank: “In your house. Not mine.”
—Ayn Rand, Atlas Shrugged, “The Concerto of Deliverance”



 Hank Rearden’s words need to be repeated to every person who, feeling aggrieved that Facebook doesn’t want to publish his diatribes against Mexicans, pouts that Mark Zuckerberg just owes it to him that Zuckerberg provide him a platform for his diatribes against Mexicans, and demands that the government overrule Zuckerberg’s control over what Zuckerberg peaceably created. The house that is Facebook was built by Zuckerberg; it was not built by the man who wants to use Facebook just to air his endless diatribes against Mexicans.


Photo taken by Jonathan Hoenig.

Sunday, August 19, 2018

Economic Value of Intellectual Property As a Direct Result of Supply and Demand, Not Labor Inputs: The Shorter Version

Stuart K. Hayashi





The following is a summary of the arguments of my much longer essay “Economic Value of Patents As a Direct Result of Supply and Demand, Not Labor Inputs.”



There is no “scarcity” on impractical, harebrained ideas for products, such as “glow-in-the-dark sunscreen.” Nor is there a “scarcity” on very basic, vague ideas for products that the idea generator has neglected to flesh out. But there is a “scarcity” of fleshed-out practicable designs for products. A “practicable design” is for a detailed, diagrammed, unique design for a product that, if put into production according to the design’s specifications, will result in units that supply the satisfaction of marketplace demand to such an extent that market participants would willingly pay for access to units at a price that exceeds the average cost per unit. A patent is granted for such a practicable original design, not a basic or general or vague idea for a category of product.

Creating such an original practicable design does not come cheap. In order for any vendor to feel confidence in selling units produced from the original design, the original design must work as promised. That consideration necessitates that the inventor run tests to measure the efficacy of units produced from the design. Hence, the inventor invests hours or years of time and labor, as well as invests in equipment, to run the tests needed to arrive at a design that is so practicable that units produced from it will stand a chance at supplying the satisfaction of marketplace demand. The time and labor and resources the inventor invests in the creation of her practicable original design are “scarce,” imposing costs upon her. For that reason, the quantity of practicable original designs for products are “scarce” as well.

While there is no finitude in impractical ideas for products, or in product ideas which remain vague, on account of no one fleshing out such ideas, there is a finite quantity on original designs for products whose units will efficiently supply the satisfaction of marketplace demand. In effect, if there were no intellectual property protection laws at all, there would still be this preexisting “scarcity” on practicable original designs for new products.

Because clients and customers are only willing to purchase product units that are practicable enough to satisfy their marketplace demand, the very nature of this consideration is the source of the fact that there is a finite quantity on the number of practicable original designs that can exist at any given moment. Hence, there is finitude in the supply of practicable original designs for new products. And if inventors are not recompensed for their investment of time and work and resources and equipment into the creation of their practicable original designs, the quantity of new inventions will become scarcer as well.

Not wanting to listen to me, some opponents of patent rights have made the knee-jerk accusation that I am trying to justify patent rights on the basis of the “labor theory of economic value.” That is a straw man on their part. I am not saying that the inventor’s investment of hard work and resources is the direct cause of the economic value of the inventor’s practicable original design. Nor is that investment the direct cause of the price that the inventor expects to be paid for her practicable original design. (When I refer to the “price” of the invention, I do not refer only to the price that the inventor could charge to a firm wishing to possess the patent, but also the royalty the inventor could charge licensees.)

The direct cause of the economic value of the inventor’s practicable original design is that the innovative aspects of the design allow for units produced from the design to supply the satisfaction of marketplace demand to an extent beyond what was capable for all the units that were on the market prior to the inventor having introduced this design of hers.

Here is an example of a patented design making possible the production of units that satisfied marketplace demand more adequately than had similarly-used units that were on the market prior to the invention of this new patented design:

Eventually there was an electrical method of instant communication over miles, coming in the form of telegraphs. But the messages sent through telegraphs could only come in the form of a series of short beeps and elongated beeps. A new esoteric language — Morse Code — had to be devised so that written English messages could be encoded into, and then deciphered from, a sequences of short beeps and elongated beeps. If economic value could be measured in “utility points,” we might imagine that someone with ready access to a telegraph might gain an average 1,000 utility points from it.

Then Alexander Graham Bell introduced the telephone. It could transmit and receive electrical signals from distances comparable to those sent and received by telegraphs, but learning and deciphering a code such as Morse Code was no longer needed. There was the new convenience of simply being able to speak one’s own language and to be understood readily by anyone on the other end of the line who used the same language. Each telephone was a unit produced from a particular design, and it can be said that someone with ready access to a telephone might gain an average 1,500 utility points from it.

If a man who once was able only to use a telegraph obtained 1,000 utility points from that telegraph, and now obtains 1,500 utility points from his telephone, then he has experienced a net gain of 500 utility points. That net gain in 500 utility points per user is the net increase in economic value for which the inventor is responsible.

Once the inventor’s practicable original design is properly recognized as her private property, whatever price she may charge for it — be it the price she might charge a firm to obtain her patent outright, or be it the royalty she tries to negotiate out of firms wishing to license her original design — is rightfully determined by the confluence of marketplace demand with supply.

The fact that patent royalties are rightfully determined by supply and demand is not negated by the simple refusal of many people to acknowledge that the practicable original design should rightfully be considered a form of private property. That is just as the fact that land prices and land rents are rightfully determined by supply and demand is not negated by the simple refusal of many people to acknowledge that a private, improved homestead should be considered a rightful form of private property.

No, that the inventor worked very hard and invested so many “scarce” resources into the creation of her original design is not the direct cause of her original design’s economic value. If she worked really hard and invested a lot on producing an original design that resulted in units that failed to supply the satisfaction of marketplace demand — if she worked hard and invested millions to invent a method for producing glow-in-the-dark sunscreen — the original design would still not be worth much.

When it comes to these practicable original designs that result in units that do superbly supply the satisfaction of marketplace demand, though, the fact that the inventor worked hard and invested time and labor and “scarce” resources into the creation of her original design is not unimportant. It is an important consideration worth my bringing up because the inventor working hard and investing “scarce” resources into the creation of her original design is the direct cause of the fact that such practicable original designs are “scarce” themselves.

This is just as the fact that a homesteader working hard and investing time and labor and “scarce” resources into the improvement of his parcel — converting an inhospitable wilderness into an improved plot capable of supporting human life — is an important consideration even though it is not the direct cause of the homesteader’s homestead possessing economic value. The direct cause of a homestead possessing economic value is that its attributes allow for it to supply the satisfaction of marketplace demand. Yet the very reason why that homestead is capable of supplying the satisfaction of marketplace demand, though, is that in his investing of time and effort and resources into the improvement of his land, the homesteader’s exercised wise enough judgment in his choices on this enterprise that resulted in the improved land possessing the attributes enabling it to supply the satisfaction of marketplace demand.

The reasons why a particular plot of improved land can and should command a high price on the supply side, is twofold. First, a plot of land is rendered inhabitable as a result of human effort and initiative, and only a few humans are willing and able to exert the effort and initiative that is needed. That consideration, by itself, is the source of the “scarcity” of improved plots of land. Secondly, each homesteader must make his own judgments in how to improve his land, resulting in different homesteaders making different choices, with some of these choices being better than others. Hence, although two homesteads may have started out as very similar pieces of geographic terrain, one might be end up more suitable than the other in terms of supplying the satisfaction of marketplace demand, on account of one homesteader making wiser choices than the other.

Likewise, the reason why a particular patented original design can and should command a very high price — be it the royalty charged to licensees or the price a firm must pay for the whole patent itself — is twofold. First, a general idea is fleshed out and converted into a practicable original design as a result of human effort and initiative, and only a few humans are willing and able to exert the effort and initiative that is needed. That consideration, by itself, is a major cause of the “scarcity” of practicable original designs. Secondly, each inventor must make her own judgments. Hence, different inventors trying to solve the same basic problem will approach that problem from different angles and make different choices. Hence, although two patents might approach the same basic problem or even result in similar devices, one might be more suitable than the other in terms of the satisfaction of marketplace demand.

Thus, no, there is no basis to the accusation of those who immediately proclaimed that my explanation was an attempt to apply the “labor theory of economic value” to inventions and patents. I have not said that the hard work and “scarce” resources that the inventor invested in her creation of her practicable original design is the direct cause of the original design’s economic value or the prices that the inventor should be able to charge.

Both (1) the economic value of the practicable original design and (2) the prices that inventor may charge for her services, are the direct result of the practicable original design’s ability to supply the satisfaction of marketplace demand. That the inventor had to invest so much hard work and “scarce” resources in order to create her practicable original design, however, factors into both (a) the “scarcity” of practicable original designs as such, and (b) the particular original design’s ability to supply the satisfaction of marketplace demand.

Yes, the economic value of the inventor’s invention comes from how the invention supplies the satisfaction of marketplace demand, a new supplying of new satisfaction of marketplace demand that had not happened before. And here is why first dibs on rightful private ownership over the invention should go to the inventor herself: any time new economic value is created, first dibs on rightful ownership over that value must goes to the very same party that created that value. When land is made more valuable on account of the homesteader improving it, first dibs on ownership over the value in that land must go to the homesteader himself.

To recognize that is not to deny that the direct source of the improved land’s value is its ability to supply the satisfaction of marketplace demand. It is proper to recognize that the homesteader’s contribution is what made it possible for that improved land to supply any satisfaction of marketplace demand. Likewise, as an efficacious original design for a product generates a net increase in value in the economy, first dibs on ownership over that value must go to the party that created it: the designer herself.

Tuesday, June 12, 2018

The Faulty Syllogism of Intellectual Property's Detractors

Stuart K. Hayashi


This essay is adapted from the much longer essay “Economic Value of Patents As a Direct Result of Supply and Demand, Not Labor Inputs.”

U.S. Patent Design No. 264,109. George Lucas’s design patent  on toys with Boba Fett’s likeness.



In this philosophic debate over the legitimacy of intellectual property rights (IP rights or IPRs), IPRs’ detractors rely on a psychological bait-and-switch. IPRs’ opponents proclaim that private property rights are only applicable to values that are “scarce.” Then they say that ideas are not scarce at all. And that is true for (a) impractical, fantastical, scientifically unsound ideas and (b) ideas that might be practical and sound in a very generalized context but have yet to be fleshed out to the point where the idea can be practicably implemented. Those sorts of ideas are easy to come by.

But patents and copyrights are not claims of ownership over either type of idea. A utility patent protects a detailed, illustrated, and scientifically accurate set of instructions for producing a unit for some good or service that is to satisfy some marketplace demand. Copyrights and design patents protect the exact, specific, aesthetic form of a design, proscribing duplication that is either exact or near-exact-with-tiny-perfunctory-and-cosmetic changes.

The specific original designs in patents and copyrights are “scarce” for two reasons:

  1. A party must invest considerable time and effort and material resources to produce a new design that plausibly possesses the potential to satisfy marketplace demand profitably. Very few parties are willing to take on this financial risk. And if these parties are not even reimbursed on these costs by the consumers who make use of their inventive design or artwork, these parties will scale back on their innovation, resulting in still fewer original designs being made available in the future.

  2. As a consequence of the variability in human experience, even when separate parties implement the same basic idea, the final result of each party’s effort ends up with its own unique qualities.


And yet IPRs’ opponents place the highly specific, granular, and scientifically tested designs that are patented or copyrighted under the umbrella of “ideas.” They rely upon people noticing there is no “scarcity” to impractical, fantasy-only ideas or to potentially-practical-but-still-vague-and-unexplored ideas, and then, in a supreme conflation, proclaim that because everything is just “ideas” sans all important distinctions, it follows that the non-scarcity of impractical ideas and vague ideas necessarily applies to the practical and specific idea-implementations in patents and copyrights. But the difference between (a) the designs codified in IP versus (b) general ideas is not a mere difference in degree; the difference is substantial enough to make it a difference in kind.

IP’s detractors advance an argument that purports to follow this syllogism. In category A is “ideas,” category B  is “that which is not scarce,” and category C is “that which cannot be rightful private property.” Then, applying Aristotle’s syllogism “If A = B and B = C, then A = C,” IP’s detractors put forth this:


  1. Ideas (A) are not scarce (B). (And this is definitely true of impractical ideas and still-only-vague ideas.)
  2. That which is not scarce (B) is that which cannot be rightful private property (C).
  3. Therefore, ideas (A) are that which cannot be rightful private property (C).



The fallacy is the presumption that the specific, practicable, and tested ideas protected in IP belong in category A alongside the impractical ideas and vague ideas. Let us be more accurate and say that impractical ideas and vague, unexamined ideas are in category Y, whereas the specific, practicable, and tested ideas codified in IP are in category Z. The reasoning of IPRs’ opponents thus ends up like this:


  1. Impractical and vague ideas (Y) are not scarce (B). True.
  2. That which is not scarce (B) is that which cannot be rightful private property (C).
  3. Therefore, specific-practicable-tested ideas, Z, a category we haven’t examined, are C, that which cannot be rightful private property.


You see how that is actually a non-sequitur?

Monday, June 11, 2018

Private Ownership Over Land Is an Obvious Natural Right But Intellectual Property Is Not?

or, A Good That Seems “Non-Scarce” and “Non-Rival” on a Smaller Scale Is Not Necessarily “Non-Scarce” and “Non-Rival” on an Important Larger Scale


Stuart K. Hayashi



The first half of this essay is adapted from the longer essay “Economic Value of Patents As a Direct Result of Supply and Demand, Not Labor Inputs,” but the second half (about my old northern European friend sneaking into movie theater screenings) is new material.


I come across Timothy Sandefur’s repeated insistence that because a defense of intellectual property rights (IP rights or IPRs) was not frequently included in Enlightenment philosophers’ treatises of natural rights, it follows that IPRs are not consistent with the Objectivist defense of IPRs. On Sandefur’s part, that is a non-sequitur for multiple reasons, the first of which is his false assumption that the Objectivist theory of individual rights is the same as the natural rights theory of Enlightenment philosophers. It is true that the Objectivist theory of rights draws from the Enlightenment philosophers’ natural rights theory, insofar as the focus is on rights to life, liberty, and private property to which a person cannot rightfully be deprived by force, but which are not entitlements that a needy person must receive from the State at the forcible expense of others. But the Enlightenment philosophers’ defense of “natural rights” to life, liberty, and property as being self-evident or granted by a deistic God is too primitive for Objectivists to find satisfactory. The Objectivist theory of rights fills in the many gaps left by the Enlightenment’s natural-rights philosophers, including their insufficient attention to IPRs.

Sandefur writes about natural rights to life, liberty, and private ownership over physical matter, including land, as if they are all part of a cohesive set, whereas he singles out IPRs as some unwelcome, out-of-place addition that Objectivists have attempted to group together with the other natural rights, imposing a horrible mismatch. He thereupon pontificates that holding IPRs to be on par with the other rights described by John Locke is something that inevitably “fails,” as IPRs are “purely statutory creations” and therefore “are not natural rights.” For those familiar with old TV cartoons, I will say that Sandefur scoffs at the Objectivist inclusion of IPRs with other rights as something akin to Hanna-Barbera executives trying to introduce the character of Scrappy-Doo into the Scooby-Doo series when membership of Mystery, Inc., should be confined to Scooby, Shaggy, Fred, Velma, and Daphne. To wit, if the rights to life, liberty, and private ownership over real estate are the original Mystery Inc., then, to Sanderfur, intellectual property rights are the Scrappy.

Implicit in Sandefur’s opining on the matter is that, among the natural rights, the right to private ownership over land is obvious — hence such a right being commonly defended by the Enlightenment’s natural-rights philosophers and the Objectivists after them — whereas a right to IP is often omitted from the treatises of the Enlightenment’s natural-rights philosophers on account of a right to IP being far from obvious. And such a right to IP being far from obvious, continues Sandefur’s presumption, is entirely consistent with his conclusion that a right to IP is just plain invalid. This assertion — that defenses of IP being infrequent in Enlightenment philosophers’ treatises on natural rights is sufficient to consider a defense of IP to be inconsistent with Enlightenment liberal philosophy — seems to be Sandefur’s other favorite rationalization for writing off IP rights as illegitimate, second only to the repeated falsehood that “scarcity” does not apply to the specific, detailed, nuanced, diagrammed designs that are copyrighted and patented.

This is silly; that an idea was not obvious to the Enlightenment’s natural-rights philosophers does not preclude that idea from being the result of the logical extension of the more rational aspects of their philosophy being taken to their logical conclusion. It was not obvious to Locke that his defense of the freedom of thought and conscience for varying denominations of Christians should logically extend to atheists. It was not obvious to Thomas Jefferson that his defense of an individual’s rightful ownership of his own life would logically extend to nonwhites. Nor was it obvious to Albert Venn Dicey that his defenses of an adult male’s freedom should logically extend to women.




The Need for Governmental Enforcement of Boundaries Separating Private Estates As Non-Obvious and Artificial, a “Creature of the State”
Moreover, that there should be a right to private ownership over land is actually not more obvious than the idea that a designer should have the first rightful claim of ownership over her design. Over 99.9 percent of the history of the genus Homo consists of such hominins being only hunter-gatherers. For over 89 percent of the history of Homo sapiens, this species has only performed hunter-gathering, functioning as nomads. The idea of a settling on the same plot of land for years was alien. Even when human beings finally began to farm plants as hunter-horticulturalists, and started the first villages, a long-term ownership over the land was strange. The convention was for hunter-horticulturalists to settle in a village for about fifteen years at the maximum — by the end of those fifteen years, nests of pesky invertebrates accumulated in the villagers’ huts, and the quantity of available game for food had dwindled, prompting the hunter-horticulturalists to abandon the village and set up another makeshift settlement elsewhere (Rob R. Dunn, The Wild Life of Our Bodies, [New York: Harper, 2011], 117.)

Over the past 5,000 years, when humans had finally decided that farming grains, rather than hunter-gathering, would be their main source of food, they developed an understanding of long-term settlement on real estate in manner dissimilar from what Locke and the Enlightenment’s other natural-rights philosophers envisioned. The first long-term land settlements consisted of chieftains and nobles proclaiming that a plot of land belonged not only to the people currently living, but also to their descendants and to the spirits of their long-dead ancestors, whom they had to consult when making decisions on how to alter the land. And those plots of land were “privately owned” only insofar as they were considered the joint property of one collective society as opposed to other collective societies.

The legitimacy of private land ownership is not even obvious to self-proclaimed libertarians who cite the Enlightenment’s natural-rights philosophers. That is why the original edition of Herbert Spencer’s Social Statics argued that land — not having been created by humans — cannot rightfully be privatized. It is also why there are self-styled “geo-libertarians” today who advance that very same conclusion. A right to private ownership over land is not fundamentally more obvious than a designer’s right to exclusive control over her specific original design — not to human beings in general or to Enlightenment-inspired natural-rights theorists in particular.

Today, thousands of people express indignation when their favorite artists, such as Lars Ulrich of the rock band Metallica, reproach them for their unauthorized copying of his art and balk at his enforcement of his IP. But that backlash is minor in comparison to what happened in the high Middle Ages, when landholders finally initiated the enclosure movement. Exactly because the need for private land ownership was far from obvious, throughout the Middle Ages grazing land was considered something that should not be controlled by a private party, but instead open to everyone in a “commons.” Nor was it obvious to these people that grazing land being held as a public domain had discouraged private parties from maintaining that land and maximizing its productivity. When a grazing area was finally recognized as the private domain of a single party, the single party put up walls to block access to non-owners — the enclosure of which historians speak — that protected that grazing area from freeloaders who tried to benefit from the land without contributing to its care.

But on account of it not being obvious to most people that this was for the best, hundreds of the former grazers considered the enclosing of the former commons to be a heinous usurpation by a private party of a public good, and hence violent riots broke erupted against the enclosures, much to the approval of left-wing professors still writing today (here and here) We are so much better off today on account of the enclosure movement succeeding over such opposition, just as we will prosper more greatly in the future if the devisers of practicable new machine designs and new forms of artwork succeed against those of the present who demand that all specific original designs should not be copyrighted but held in a digital “commons.”

Collectivists who denounce private ownership over land are actually correct in this point: There is no natural, default division in one plot of land from another; the boundaries separating one plot from another are enforced by the State even in the many cases where there is no physical marker of that boundary on the actual ground. The collectivists continue that the property line separating parcels does not exist in any market by default, but is an artificial imposition by the State, a “Creature of the State” (sound familiar?).

John Locke’s reply, of course, is that while the land itself already existed, what justifies an entrepreneurial, innovative homesteader taking private ownership over a particular parcel is that while the land already existed, that homesteader’s improvement of the land — rendering it hospitable — is the creation of new economic value that had not existed in the land prior to the improvement. The boundary separating one homestead from another may be an artificial, human creation, but so was the value that each homesteader gave to his or her own separate plot. And that applies to inventions and artworks to be protected under patents and copyrights respectively — those are new economic values that the designer creates and which otherwise would not exist, not having already existed in the material objects that will eventually be made into unit’s according to the inventor’s or artwork’s design.

As I have discussed elsewhere, the homesteader’s right to own the land and other natural resources he improved — entities which had no owner prior to his improvement of them — is the original intellectual property right. Karl Marx obfuscates the meaning of Locke’s statement that the “labour” of the homesteader’s “body, and the work of his hands, we may say, are properly his,” and therefore what the homesteader “removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property.” By removing Locke’s use of the words labor, body, and hands, and putting special emphasis on these words in a new context, Marx bamboozles his readers into believing that Locke’s argument is that the physical motor movements employed by the homesteader are the direct cause of the addition of new economic value to the land. But the homesteader’s most essential investment in the improvement of the land was the intellectual effort — the intellectual labor — in studying the terrain and employing the proper plans that would yield the most efficacious results.

A homesteader who plans carelessly will yield pitiful results even as he exerts just as much physically strenuous effort as does another homesteader who invested considerable time and effort in learning the scientific properties of the terrain and plans accordingly. It is qua inventor and designer, not qua manual laborer, that the homesteader took resources that were no one’s private property and, from such resources, produced a form of economic value that had not existed previously.

The same principle even applies to a hunter-gatherer who takes sticks and stones that no one had previously claimed as personal belongings, and then fashions them into a stone tool — it was not mostly the physical actions, but the hunter-gatherer’s use of his mind, that produced this new value. And it is not an accident that the socialists’ argument against privatized real estate is nearly identical to the IP-opposing libertarians’ argument against IP — that there being “gray areas” in the establishment of the boundary separating one piece of property from another is somehow enough to invalidate private ownership in this context altogether.

A homesteader’s right to what he homesteaded is one of the earliest recognized intellectual property rights. And the intellectual property rights in the creation of such new value is the source of all wealth. It is therefore self-contradictory to claim that private ownership over improved land is a legitimate natural right whereas IP is not; private ownership over improved land is a form of IP.





It Is Only Through a Narrow Scope That Access to Easily Duplicated Artwork Seems “Non-Rival” and “Non-Scarce”
At this point, Timothy Sandefur will issue the reply that his distinction between ownership over private land versus original designs is legitimate on account of land of there being an inherent “rivalry” among persons who want the same plot of land, whereas he and most other people see no inherent “rivalry” when it comes to access to a particular digital motion picture that can be downloaded online. As Sandefur puts it,

In the case of tangible property, real [as in private “real estate”] or personal...the property is naturally exclusive, meaning that if I have it, you simply cannot; if I take it, you no longer have it — you have been “disseised.” Intellectual property, however, is not like this. I can “take” it from you, and yet you still have it. If, for example, you are the...musician...John Fogerty...and you have written...“Born on The Bayou,”...then I can sing “Born on The Bayou” in my shower, and you can still, at the same time, use and enjoy your “property” as you wish: you can perform it, sell it, or leave it alone.

That is, if you own a particular plot by a gorgeous river, then I cannot have that same plot, and your claiming more land for yourself means less for me. By contrast, goes the argument, if 500,000 people illegally download the same copyrighted motion picture over the World Wide Web, that does not obviously reduce the quantity of units of that download available to millions or even billions of other people want access to digital copies of that movie.

Another manner in which this can be phrased is that access to an easily copied digital artwork is “non-rival.” For a good to be a “rival” good means that, because there is a finite number of units of this good on the market at any given moment — even if more units can be produced in the long run — one user obtaining an additional unit will necessarily result in fewer units being available to other users in the near future. Conversely, for a good to be “non-rival” means that one user accessing the good does not reduce the quantity of units available for others to access.  Sandefur says about making unauthorized copies of movies online, “In Jefferson’s phrase, a person who lights his candle from mine illuminates himself without darkening me.”

In reality, a growing number of people making unauthorized duplicates of a particular movie will reduce the number of original productions of similar movies that people will enjoy in the future. And it is pretty ironic and ultimately inconvenient for Sandefur’s case against IP that, in his explanation of how intellectual property is “non-rival,” he compares it to a flame on a candle, as candles are an obviously “rival” good. We will return to both of those points by the conclusion of this essay.

This particular attempt to classify private land ownership as legitimate and intellectual property as illegitimate on the basis of “scarcity” is itself not so much in the tradition of the Enlightenment’s natural-rights philosophers as it is in the tradition of twentieth-century Chicago-school economists who reject natural-rights theory in favor of “greatest good for the greatest number” ethical utilitarianism. That false distinction most prominently comes from the twentieth-century Chicago-school economist Arnold Plant. Still, Sandefur can reply, even if this dichotomy was emphasized more by utilitarian Chicago-school economists than by the Enlightenment’s natural-rights theorists, the distinction is still valid and does not seem to contradict the Enlightenment’s natural-rights philosophers. After all, while John Locke did argue for copyrights elsewhere, he did not include a defense of intellectual property in the very Second Treatise of Government that immortalized “life, liberty, and private property,” and which provided the inspiration for the Declaration of Independence.

But this purported distinction between why land should be private, whereas IP shouldn’t be, isn’t as clear-cut as IP’s opponents want us to believe. Years ago I had a friend from northern Europe who had dubious ethics when it came to movie theaters. He noticed that in each movie screening, there were many empty seats. He would therefore buy a ticket to one movie and, after it ended, sneak into a showing of another movie. After that, he would sneak into a third movie. He noted that every showing of a movie had a fixed cost. The major cost of each theater screening consisted of someone turning on the projector; that cost the same regardless of the number of people in the audience. Another major cost had to do with cleaning up the mess that patrons made within the theater, such as leaving popcorn on the floor. However, unless someone is particularly extreme in his or her messiness, just one additional person filling a seat in the theater is negligible in terms of how much it costs to clean up the theater.

 Hence, the cost of each screening was the same regardless of whether my friend snuck in or not. His conclusion was that if he snuck into that second, third, and fourth movie, the theater lost nothing; no additional cost was added by one person placing himself in a seat that otherwise would have been empty anyway. Judging in terms of whether just one person adds himself to this room of many otherwise-empty seeds, access to a second or third movie initially seems non-scarce.

And that is the crux of the matter: in the immediate moment it appeared to my northern European friend that he was not competing against any would-be theater patron for a scarce resource. From his vantage point, his sneaking into a showing and taking a seat that would have been empty anyway was not depriving any paying patron of that seat. In the immediate moment, there was no obvious scarcity to the value that he accessed.

Here, the predictable reply from IP-opposing libertarians is that if too many people snuck into the theater at once and took all the remaining seats, the theater would be overcrowded and then others couldn’t enjoy the screening. By contrast, these IP-opposing libertarians add, even if two billion people made unauthorized downloads of an artist’s digital artwork, that artist will still have lost nothing, as she maintains custody of the original copy.

But too many people crowding onto a land space too small to support them has an effect that is actually not too different from what happens when the number of people making unauthorized downloads of an artwork altogether prevents the artist from recouping the costs of producing that very same artwork. If that artist isn’t reimbursed by those who download her work, she will stop making new art she otherwise would make. That is an exacerbation of the scarcity of new IP. Upon hearing my example of my friend illegally filling a theater seat otherwise would have been empty, many libertarians will note that even if my friend doesn’t notice an economic “scarcity” in the short run, such economic “scarcity” will still apply in the long run. It would behoove those same libertarians to acknowledge that economic “scarcity” also applies in the long run in terms of artworks that prove to be very costly to create and problem-solving inventions that were costly to devise.

Too many people being able to get away with sneaking into a movie theater without paying for a ticket will eventually result in a large number of business owners closing down their theaters, and too many people being able to get away with making unauthorized digital duplicates of an artwork without reimbursing the artist will eventually result in a large number of artists reducing the quantity of output that they avail to the public. When my friend stole access to movie theater showings, he was doing to the theater owners, on a smaller scale, what millions of people do to an artist when they make unauthorized digital duplicates of her artwork. Sure, the number of instances of people pirating an artist’s artwork that it would take to motivate an artist to abandon her craft will probably be much greater than the number of instances of people sneaking into theater showings it would take to motivate a theater owner close his business — but, in the end, the effect is the same.

Let us go back to the very metaphor from Thomas Jefferson that Timothy Sandefur cited: “In Jefferson’s phrase, a person who lights his candle from mine illuminates himself without darkening me.” If you light a candle, and then I use your candle to light mine, that does not extinguish the flame on your candle. That is just as my northern European friend being the lone person to sneak into a movie theater’s empty seat during a screening did not add to the theater owner’s costs and did not deprive a paying customer of a seat. And if just one person makes an unauthorized digital copy of a Metallica song, Lars Ulrich would not feel the brunt of it. But if a thousand people stampede toward you and try to light their own candles using yours, that will extinguish the flame on your candle. That is why people who want reliable access to a small flame notice that they must purchase their own matches and lighters and candles. When a million people duplicate an artist’s work and fail to reimburse her on the monetary value it cost her to produce that work, that does likewise extinguish the flame of future inspiration on the artist’s part. When you take the very metaphor that Sandefur employed against IP, and think on it further, it undermines his case against IP.



On June 14, 2018, I added the paragraphs about the homesteader’s right to the new value he created in the land, coming from the use of his mind, being one of the earliest recognized intellectual property rights.

Monday, May 28, 2018

Robert Stadler Syndrome

or, The “Demographics Matter” Canard

But what can you do when you have to deal with people?
—Dr. Robert Stadler in Atlas Shrugged 

But what can you do when you have to deal with people . . . of a 
cultural background different from mine?
—Those who recite the “demographics matter” slogan



Stuart K. Hayashi







“Demographics matter. Numbers matter.”

That is a favorite slogan often recited to rationalize the proposition that Western governments block immigration of people from poor countries on the basis that they come from a barbaric “cultural background” (“cultural background” usually being a euphemism for “race”). The premise is that nonwhites from poor countries are programmed to have a particular political ideology and are programmed to want to accept welfare and vote for welfare, and also to be violent, and therefore “we” (meaning whites) should demand that government agents block these people from entering Canada and the USA and Western Europe, denying freedom of association both to those immigrants and to the native-born Westerners who wish to deal with them, to “preserve freedom.” Those who say this slogan expect to be taken seriously when, essentially, they are writing off whole groups of people as inherently violent. Ironically, it is those who recite the “demographics” slogan who are advocating the initiation of the use of force on individuals.

There are many people who, decades ago, understandably grew enamored with the message of free enterprise and of everyone being able to keep the wealth that she earns. But upon reaching old age, many of these people have grown frustrated. If this free-enterprise message is so great, why is it routinely rejected by most of the Earth’s population — and why is it that people of some particular minority “demographics” are likelier to reject it than others?

A convenient “explanation” — rationalization, really — is that if people from specific minorities are especially resistant to the message, they are just plain hopeless, having been programmed to reject the message on account of their deeply ingrained cultural upbringing, race-related genetics, or both of those factors. And, continues the rationalization, acceptance of the free-enterprise message is so rare among members of those “demographics,” that people from those “demographics”  should be dismissed as psychologically unreachable. But it gets worse than that. It is not as if those who write off these “demographics” merely decide to leave those “demographics” alone. The presumption continues that it is members of those “demographics” who will eventually destroy us (white) free-enterprisers, and therefore “we” (white) free-enterprisers must strike at them before that can happen.

And hence, these frustrated, now-cynical former free-enterprisers decide on a policy of telling members of those blacklisted ethnic demographics, “Free enterprise for me but not for thee.” But, in the long run, that is not how free enterprise works. To use government force preemptively to deny free enterprise to large populations, based on the presumption of guilt — and not even in a wartime context — inevitably involves the initiation of the use of force on innocent, peaceful people. The attempt to reserve free enterprise for some ethnic “demographics” while denying it to others, unavoidably initiates the use of force upon the peaceful, and is therefore the denial of free enterprise altogether.

This brings to mind the character of Dr. Robert Stadler in Atlas Shrugged.  Throughout the story, Dr. Stadler keeps getting more paranoid and more obsessed with being able to use force against everyone else. Why does he do that? It’s because he presumes, before they even interact with him, that everyone else is incapable of using reason in dealing with him. But if those other people will not reason with Dr. Stadler when they interact with him, their only other recourse is force. In attempt to preempt those other people from using force on him, it is Dr. Stadler who ends up being the party to initiate the use of force on them.

That is the danger of writing off entire “demographics” of people as being congenitally barbaric and unable to deal with us through reason. In presuming “they” will initiate force on “us,” it will be “we” initiating the use of force on “them.”

Friday, May 25, 2018

Economic Value of Patents As a Direct Result of Supply and Demand, Not Labor Inputs

Stuart K. Hayashi




Imagine that I promise to pay you for a service, you perform the service, and I refrain from paying the promised amount. In such a situation, I would be stealing from you the value of the time and labor that you put into the performance of that service — time and labor you otherwise could have employed in some other more fruitful activity. When people make use of the talents of inventors and artists, inventors and artists expect to be compensated for their services just as you do.

When an artist, such as Justine, makes her motion picture commercially available, she avails it to other persons on the implicit contractual understanding that that those who consume access to her artwork will pay her for this access at the price that she sets. Just as my agreeing to pay you in the first place was a major consideration in why you performed that service for me in the first place, a major consideration for why Justine made her motion picture was that the parties that consumed access to her movie would agree to contribute to compensating her for the costs of having made the motion picture at all — with any revenue in excess of her expenses being able to fund future projects.

Imagine that I then make an unauthorized duplicate of her motion picture and watch it. I can rationalize endlessly that no theft took place, as my making an unauthorized copy of her motion picture does not deprive her of her master copy. The truth remains that by accessing the artwork’s value against the contractual terms that are implicit in patents and copyrights, I stole from Justine the value of the resources used up to make her movie a reality, value for which the artist was to be reimbursed.

When I point this out, those who denigrate the legitimacy of intellectual property rights (IP rights or IPRs) — often self-described “libertarians” — whack at a straw man that was stitched together by Tom Palmer of the Cato Institute (and which, unsurprisingly, Timothy Sandefur endorses). Following in Tom Palmer’s line of specious reasoning, these opponents of IPRs proclaim that my argument amounts to an implicit citation of Karl Marx’s “Labor Theory of Economic Value.” Tom Palmer would have us believe that a defense of intellectual property rights amounts to saying, The inventor or artist worked really hard on her creation, and that consideration alone demonstrates that the creation is a great economic value which entitles the creator to piles of cash rewards and also exclusive monopolistic ownership over the creation itself.

Then these opponents of IPRs proceed to “correct” me. The “correction” begins innocently enough — with the proper observation that insofar as there is a free market, the economic value and price of any commodity is the result of the convergence of two considerations: first, how much marketplace demand there is for the commodity, and, second, how much of that commodity can be supplied to the marketplace. The “correction” continues that in any market, a built-in constraint on how much of anything can be supplied is “scarcity,” meaning that there will necessarily be a finite quantity of units of that commodity available. Even if, in the long term, an infinite quantity of units of the commodity can be created, in the present and at any given moment, there is necessarily a specific number of units of that commodity in existence. And when that commodity is a manufactured good, this is the result of the fact that the inputs that go into producing units of the good are themselves “scarce,” finite. If the commodity is some naturally occurring substance, “scarce” resources still must be expended in the process of acquiring quantities of this substance and transporting it to customers and clients who otherwise would not be able to access it.

But the effort of IP’s detractors to  “correct” me goes awry. These detractors continue that the problem is that patents and copyrights are an attempt to claim exclusive ownership over ideas — and a computer-digitized artwork that is easily and cheaply duplicated qualifies — and that because ideas are intangible, not confined to the immutable rules of physics, there is perforce an infinite quantity of ideas. That is, because ideas are intangible and not confined to the immutable principles of physics, the “scarcity” present in all economic goods does not apply to such “ideas.” Hence, these opponents of IP conclude, in a truly free market only a physically produced unit of an invention or artwork should be recognized as private property, whereas private ownership cannot rightfully be claimed over the intangible design that serves as the basis from which units of the invention or artwork are produced.

Hence, they say, to be a stickler in saying that demand-and-supply is the direct source of a commodity’s economic value is to preclude an intangible design for a machine or artwork from being considered a private belonging over which the designer deserves first claim of ownership. And they add that on this basis, one can provide no possible argument for why an intangible design should be considered a private asset, or why the design’s very own designer should have first dibs on such exclusive ownership over that design, other than some crude or vulgar derivation of Karl Marx’s Labor Theory of Economic Value.

That is a complete falsehood.

I make the following points.

1. It is true that the economic value of a commodity is the result of the intersection of marketplace demand with supply, referring to both (a) the willingness and ability of clients or customers to trade something of value for commodity and (b) the consideration that the “scarcer” the commodity gets in its supply, the more that clients and customers who discern value in that commodity will willingly pay for it.

2. This means that how “scarce” the commodity is in quantity and supply does play a role in its being of economic value and being able to command a particular average equilibrium price in a free market.

3. IP’s detractors are incorrect in their assumption that there is no “scarcity” in the quantity or supply in the intangible designs protected by copyrights and patents. There is no “scarcity” in impractical, entirely fantasy-based ideas. Nor is there “scarcity” in very vague ideas that might one day be practicable if applied but which not yet have been thought-out carefully enough to be ready for implementation. But that is not what is enshrined in a patent or copyright.

4. Patents and copyrights are the recognition of private ownership over a specific original design. The patent is on a detailed, diagrammed set of instruction on how a specific device or procedure is to be assembled and operated, and the device or procedure must be able to function as promised when operated by someone seasoned in the field to which the device or procedure pertains. And how practicable or efficacious the design for an invention is, is an enormous consideration. Its practicability or efficacy is measured by how much marketplace demand would be satisfied by the supplying of units produced from the inventor’s specific design. And such practicable, specific original designs for inventions and artworks, able to supply the satisfaction of marketplace demand efficiently, are indeed “scarce.”

5. The reason why such practicable and efficacious, specific original designs are “scarce” is that, for them to work, the designer must make use of time and effort and testing equipment and other “scarce” depreciable resources, all of which impose financial expenses. Because the designer makes use of, and depreciates or depletes, “scarce” resources in the creation of practicable and specific original designs, which proves to be costly, very few people are willing to embark on such a long-term project. Thanks to the “scarcity” of the inputs that must be inputted in the production of practicable original designs, the practicable original designs end up being “scarce” in quantity and supply themselves. This is the first section of my argument that IP’s detractors insist on misidentifying as a citation on my part of Marx’s Labor Theory of Economic Value.

6. Because there is “scarcity” in the quantity and supply of specific original designs enshrined in copyrights and patents after all, it happens that before patents and copyrights were ever recognized, the principles of marketplace demand and supply already applied to such designs — except that no designer could implement the full value of her practicable original designs until copyrights and patents were codified. That is just as no homesteader could implement the full value of the land he improved until laws recognized private ownership in human-improved land.

7. Hence, the considerations (a) that a commodity’s economic value and free-market price come directly from the confluence of marketplace demand and supply and (b) that the commodity’s supply is limited by its “scarcity,” fail to preclude the practicable, specific original designs protected in patents and copyrights from being of economic value, from commanding their own free-market price, and from being worthy of being codified as private property.

8. This is the second part of my argument that too many opponents of IP insist on misconstruing as a reliance on Marx’s Labor Theory of Economic Value: once it is established that an asset can rightfully be considered a form of private property that possesses economic value and can command a price negotiated in a free market, there is still the issue of which party should have the first claim of rightful private ownership over that asset. A principle of John Locke’s applies here, as there are two types of commoditized value that are created anew, bringing about a quantity of economic value and economic utility exceeding the combined economic value of all the man-hours and raw materials and machinery that were inputted in their creation. John Locke pointed out that the first type is human improvement over land — the value of a human-improved plot of land to human beings is greater than the value that same plot had when it was still unimproved, and the net increase in value was the result of what the homesteader put into it, which is why the homestead who improved the land should have first claim of ownership over it.

Likewise, when an inventor’s specific original design enables the production of units that satisfy marketplace demand more efficiently and effectively than all the similarly-used units that were produced prior to the inventor introducing this new design, that improvement in efficiency and effectiveness is new economic value and new wealth that the inventor has created.

The homesteader should have first claim and control over the land he improved on account of his producing a net gain in value from the homestead.

By the same token, the inventor or artist should have first claim of ownership and control over the design she created on account of the net gain in economic value emerging as a consequence of her new design being put into production. To recognize this truth does not conflict with the recognition that the economic value of the inventor’s design itself results from both the natural limit or “scarcity” in the quantity of such practicable designs. Nor does that truth conflict with the fact that the implementation of the inventor’s practicable design results in the supplying of an enhanced satisfaction of marketplace demand.


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A Review of Stuart’s Case for Intellectual Property Rights
As I wrote before, those who denounce intellectual property rights (IP rights or IPRs) as invalid happen to knock at a straw man when they speak as if a patent is a claim of ownership over a basic idea for whole category of product, such as “airplane,” and as if a patent confers upon its owner a government-enabled monopoly over an entire industry. From the years 1867 to 1957, the U.S. Patent and Trademark Office (PTO) issued over 16 U.S. patents to over 15 separate parties for the paperclip. In that 90-year span, the interims between each new issuance of a U.S. patent on the paperclip was shorter than 17 years — every new U.S. patent on the paperclip was issued prior to the expiration of the U.S. paperclip patent directly preceding it. The reason for this is that no U.S. paperclip patent conferred upon the patent holder exclusive ownership over the basic idea of “paperclip” — an object that fastens together separate sheets of paper but which makes no puncture in the sheets, hence such a fastener being easier to remove from those sheets than would a staple.




A patent does not claim ownership over a basic idea, but ownership over a highly specific and precise implementation of that idea, and there are multiple separate methods whereby that same idea can be implemented. The patent is a highly detailed description — usually accompanied by diagrams — on how that idea is to be implemented in a fashion that successfully yields the desired results when used as intended, as which can be understood by someone experienced in the field to which the invention’s function pertains. That is, if there is a patent on a new sort of steel furnace, it can be operated or constructed by a seasoned steelworker. The patent’s detailed set of instructions for implementation of an idea is a specific original design. It can also be called a “model.” As is the case in my other essays on IP, by model here I do not mean a working physical model, such as a prototype, but the aforementioned detailed and diagrammed description of the device and the instructions for assembling and operating it.

A common pronouncement about the evilness of patents is that it often happens that multiple separate parties, each unknown to the others, arrive at the exact same invention at the exact same time and yet, due to a patent conferring a monopoly and going to but one party, only one of these simultaneously inventing parties will receive its patent. Conversely, it is said, the other independent inventing parties will be forbidden from producing units of the design they created through their own independent R-and-D. This scenario is false. Multiple parties can arrive at the same general idea, independently of one another, within a relatively close or small span of time. But their own specific original designs are not exactly alike, and each party can receive its own patent.

It is frequently said that Alexander Graham Bell and Elisha Gray filed for the same patent for the telephone at the same day. Actually, Gray filed for a patent caveat, which was a warning issued to other would-be inventors that he planned on seeking a patent for a specific technology in the near future. More importantly, the plans in Gray’s filing were not for the same invention as Bell’s. Bell invented an electric telephone — a device that took in speech on the transmitter end, converted that sound into electricity, and then converted that electricity back into intelligible speech on the receiver end. Gray’s plans were for a harmonic multiple telegraph, which would also take in sound on the transmitter end, convert it into electricity, and convert it back into sound on the receiver end, but which was not sophisticated enough for the sound on the receiver end to come out as coherent speech. What both Bell’s and Gray’s plans had in common was that they employed the principle of “variable resistance” in their attempt to transmit a nuanced re-creation of sounds.

Patent litigation still arises between such parties on account of the areas in which the two designs are very similar — that is what I call an “overlap” in their designs. At Texas Instruments, Jack Kilby came up with the Integrated Circuit and his patent focused on the circuit itself, whereas, at Fairchild Semiconductor, future Intel-cofounder Robert Noyce arrived at something similar but, in his own patent, put more emphasis on how the Integrated Circuit was to be wired with other components within a computer. Such disputes have historically been settled privately when these separate parties agree to pool their patents into a single trust. This option puts such disputes to rest. Note that this situation does not discredit the legitimacy of patents per se. Nor does it justify the rationalization that if two parties can arrive at similar inventions within relatively close temporal proximity to one another, that that somehow legitimizes the pirating of the inventors’ designs by third parties that contributed not a cent to any of the R-and-D to led to the breakthroughs making the invention possible.

Likewise, enforcement of a copyright on Lord of the Rings will not guarantee that the copyright holder can successfully sue a writer who pens a novel boasting the same basic premise of Lord of the Rings and places the story in a similar setting; nor can the copyright holder even be sure he will win a lawsuit against a writer who copies the plot beat-for-beat. Enforcement of this copyright does ensure that if someone makes unauthorized duplications of the text verbatim, or copies most of the text with but a few minor cosmetic changes in phrase in each paragraph, the copyright holder has a strong legal case.

Moreover, some patents are more practicable than others, just as how, even if two homesteaders each squat on their own similar adjacent plots, one plot can emerge as more productive than the other on account of one homesteader making wiser decisions. If a man received a patent, and would necessarily win every patent infringement lawsuit he filed, he still would not necessarily profit from the patent at all — not if the design he patented was for something so unwieldy that no profit-seeking firm would produce it, not even to infringe it. There are many such patents. No more than 2 percent of patents generate a profit for their owner. Those few truly profitable patents are not only on specific original designs, but are also efficacious and practicable specific original designs. As in my other essays on the topic, by efficacious and practicable I mean that if the specific original design in the patent were put into production, the resulting units would supply the satisfaction of marketplace demand to such an extent that market participants would pay for access to these units at a price that ultimately exceeds the average cost per unit.

At this point, for the benefit of my Objectivist readers, I have to explain what “scarcity” means in an economics context. A commodity’s free-market economic value — at least, as far as we are concerned with the price at which a commodity is sold — is determined by the junction of marketplace demand for the commodity with how much supply there is of that commodity. And supply of any commodity is affected by “scarcity” — the fewer units there are of a commodity for which there is much marketplace demand, the higher price the vendors can conceivably charge per unit. And the “scarcer” are the resources go into the production of units of a commodity — the scarcer are the tools or raw materials or willing available man-hours that are required to produce such units — the higher the average price must be to motivate would-be vendors to go through the trouble of availing that commodity to clients or customers.




The Faulty Syllogism of the Opponents to Intellectual Property Rights
In this philosophic debate, the opponents of intellectual property rights (IPRs) rely upon a psychological bait-and-switch. IPRs’ opponents proclaim that private property rights are only applicable to values that are “scarce.” Then they say that ideas are not scarce at all. And that is true for (a) impractical, fantastical, scientifically unsound ideas and (b) ideas that might be practical and sound in a very generalized context but have yet to be fleshed out to the point where the idea can be practicably implemented. Those sorts of ideas are easy to come by.

The specific original designs are “scarce” for two reasons:


  1. A party must invest considerable time and effort and material resources to produce a new design that plausibly possesses the potential to satisfy marketplace demand profitably. Very few parties are willing and able to take on this financial risk.

  2. As a consequence of the variability in human experience, even when separate parties implement the same basic idea, the final result of each party’s effort ends up with its own unique qualities.


And yet IPRs’ opponents place the highly specific, granular, and scientifically tested designs that are patented or copyrighted under the umbrella of “ideas.” They rely upon people noticing there is no “scarcity” to impractical, fantasy-only ideas or to potentially-practical-but-still-vague-and-unexplored ideas. In a supreme conflation, IP’s detractors proclaim that because everything is just “ideas” sans all important distinctions, it follows that the non-scarcity of impractical ideas and vague ideas necessarily applies to the practical and specific idea-implementations in patents and copyrights.

We are to believe that their argument follows this syllogism. In category A is “ideas,” category B is “not scarce,” and category C is “cannot be rightful private property.” Then, applying Aristotle’s syllogism “If A = B and B = C, then A = C,” they put forth this:


  1. Ideas (A) are not scarce (B). (And this is definitely true of impractical ideas and still-only-vague ideas.)
  2. That which is not scarce (B) is that which cannot be rightful private property (C).
  3. Therefore, ideas (A) are that-which-cannot-be-rightful-private-property (C).

The fallacy is the presumption that the specific, practicable, and tested ideas protected in IP belong in category A alongside the impractical ideas and vague ideas. Let us be more accurate and say that impractical ideas and vague, unexamined ideas are in category Y and that the specific, practicable, and tested ideas codified in IP are in category Z. The reasoning of IPRs’ opponents thus ends up like this:

  1. Impractical and vague ideas (Y) are not scarce (B). True.
  2. That which is not scarce (B) is that which cannot be rightful private property (C).
  3. Therefore, specific-practicable-tested ideas, Z, a category we haven’t examined, are C, that which cannot be rightful private property.


You see how that is actually a non-sequitur?




How the Default, Inherent “Scarcity” in Practicable Original Designs Affects Their Supply, With or Without Governmental Recognition of Intellectual Property
The commodity’s free-market economic value and free-market price are set by the converging considerations of marketplace demand and supply, and supply is a function of “scarcity” in this respect: the “scarcer” is the commodity or the inputs that go into producing the commodity, the more reluctant are would-be vendors to vend the commodity in the absence of a high price to make it worth their while.

When economists say that “scarcity” applies to the quantity and supply of a commodity, that is not necessarily a concession on their part to Rev. T. Robert Malthus’s notion that human beings will keep depleting nonrenewable natural resources until everything is gone. In most discussions of economics, to say “scarcity” applies to a commodity only means there is a finite quantity of units of that commodity available at a given moment. Say there are 100 widgets produced and a single party purchases 95 of them; there are only five left on the market for other would-be purchasers. Hence, “scarcity” applies to the widgets, even if 100,000 additional units might be produced in the three months ahead.

Note that this consideration shall be important later, as it is at the heart of the refutation of libertarian IPR-deniers who insist that a defense of IPRs amounts to an invocation of Karl Marx’s labor theory of economic value. The important consideration is twofold: First, of course the economic value of a specific original design is found in the conjunction of marketplace demand with supply, wherein inventors are able to charge a specific price — royalties — for their services on account of there being a “scarce” supply and quantity of specific original designs from whence come units for products that adequately satisfy marketplace demand. Nonetheless, second, the direct cause of the “scarcity” in the quantity of practicable new designs for products is the fact that practicable original designs emerge primarily as a result of their designer using up such “scarce” inputs as time and man-hours and material resources for experimentation, all of which impose financial costs upon the designer in this endeavor, thereby resulting in there being a “scarcity” in the supply and quantity of practicable original designs themselves. And this constraint on the supply and quantity of practicable original designs is a default, constant condition in the market for human-made goods, emerging prior to any statutory recognition of patents or copyrights.

Were the patent-haters correct that my argument was merely an extension of Marx’s labor theory of economic value, then I would have been arguing that an engineer’s design possesses great economic utility within itself simply by virtue of the engineer having made many strenuous physical motions in drawing up that design.

But no, I recognize that the economic utility and economic value of the engineer’s design comes directly from both consideration of how the engineer’s design satisfies marketplace demand and of how the reality of markets themselves, sans governmental interference, places a constraint on the quantity of practicable original designs that can ever be supplied. It is not my fault that the fact that the requirement of inputs of “scarce” resources in the production of practicable original designs necessarily limits the quantity and supply of practicable original designs themselves. Nor is it my fault that this fact plays an important and indirect role in how the supply of practicable original designs in products is matched to the marketplace demand for units produced from such designs.

Perhaps that can be understood more clearly upon a reading of my essay “Three Important Aspects of Marketplace Demand and Three Important Aspects of Supply” over here.



Locke’s Designer-Entrepreneur-As-Owner Principle Easily Reconciled With Supply-and-Demand Economics
Again, a major reason for the denigration of IPRs is a misunderstanding of economic “scarcity” on the part of IP’s detractors. They misidentify the works encoded in patents and copyrights as just “ideas,” as if theses specific original designs are no “scarcer” than throwaway impractical ideas like “glow-in-the-dark sunscreen” or potentially practical ideas that remain vague on account of no one yet following up on them. That is not a mere difference in degree; the difference in degree is of such extensive magnitude that it becomes a difference in kind.

Consider this: land, as such, is actually not very scarce. Half the human population dwells on one percent of the Earth’s land. Ninety percent of the human population occupies ten percent of the land. An entire continent, Antarctica, has no human colony on it. To be more precise, when I say “hospitable land,” I do not mean “land that was good enough to our hunter-gatherer ancestors”; what they put up with back then, we need not and should not tolerate today. By “hospitable land,” I mean that if you settled on it, you could be sure that it is within a society with an infant mortality rate lower than 20 percent.

When a homesteader takes a tract of land that was once inhospitable and converts it into a tract that is hospitable, that homesteader creates no new materials or matter; the materials and matter on the tract was already in existence, and yet the newly emerging hospitability of that tract is new economic value created, economic value that was not in the economy until the homesteader produced it. Land, as such, is not scarce, but insofar as once-inhospitable land has become habitable, the new inhabitability is economic value that is “scarce.”

Locke’s homesteading principle (actually, designer-entrepreneur-as-owner principle) provides the proper rebuttal to a favorite collectivist talking point that was at least as old as the late Renaissance, when Locke’s philosophic foil and direct opponent, Sir Robert Filmer, alluded to it. The collectivist talking point is that there is no natural, default division in land. And yet boundaries separating one plot from another are enforced by the State even in the many cases where there is no physical marker of that boundary on the actual ground. The property line separating parcels, then, does not exist in any market by default, but is an artificial imposition by the State, a “Creature of the State” (sound familiar?).

And no landholder actually created his own land; all the land that humans occupy already existed prior to there being any humans. Hence, the actual creator of the land is God, and every landholder is usurping a value he did not create when he has no more rightful a claim on that land than the many people who hold no land. The normal implication of this argument is that either land should not be considered anyone’s private property, or that all the land should be considered socialistic public property.

(Sir Robert’s conclusion is similar to the latter, but he adds that because some patriarchal authorities are keener decision-makers than most people, authority over management of the land should be delegated to nobles. One can interpret this as meaning that Sir Robert dos not believe that nobles have true ownership outright over land, but that the land is public property in a public trust, and the nobles are merely stewards who must manage this public property for everyone’s benefit.)

Locke’s reply is that while no one person created unimproved land, which is non-scarce, it did take human effort and initiative — and, ultimately, creative designing and entrepreneurship — to render the land improved and congenial to human habitation. That new hospitability in the land Is new economic value created by the homesteader and that is why the homesteader holds rightful claim of control over the improved land — that is the means whereby the homesteader is to continue to control and benefit from the new value he has originated.

Locke phrased this as,

Though the earth, and all inferior creatures, be common to all men, yet every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property.

By this, Locke means that, qua creative designer and entrepreneur, a person such as a homesteader creates new economic value and that first claim ownership over new economic value created should go to the very party that created that value. But the use of the word labor is what Marx conveniently misconstrues in an attempt to peddle a conclusion opposite of Locke’s while falsely touting it as the logical conclusion to be drawn from Locke’s own premise.

Karl Marx proclaims that if a homesteader mixing his labor with the soil of his parcel, touching and manipulating the soil with his bare hands, gives the homesteader proper ownership over his parcel and all the fruits reaped from it, then it follows that manual laborers in factories touching and manipulating the factory equipment — mixing their manual labor with the factory equipment — directly confers upon those manual laborers complete proper ownership over the factory equipment (the entrepreneur and investors be damned!) and all the revenue generated from the units produced from the manual laborers’ operation of the factory equipment.

This is a conflation on Marx’s part. When Locke says that the entrepreneurial homesteader mixes his labor with the soil and therefore deserves the profits therefrom, the term labor dos not refer exclusively or primarily to the homesteader’s physical motions, what in centuries subsequent to Locke’s own lifetime would come to be thought of as the manual labor of factory workers.

By labor, Locke means any conscious human effort that successfully produces economic utility. And although the wealth generated from the homesteading would not be generated if not for physical motions performed by the homesteader, what most contributes to success in the homesteader’s actions is intellectual in nature: the physical actions performed by the homesteader, such as digging in particular places and planting particular patches, are beneficent only insofar as the homesteader, meticulously evaluating the nature of his region, employs wise decisions. Regardless of how hard he works, the physical exertion of the homesteader is fruitless if he unthinkingly digs in the wrong spot or plants varieties of crops that are clearly unsuited to the geographic environment. According to Locke’s argument, it is primarily in the role of a for-profit entrepreneur that a homesteader creates new economic value that he should privately own and from which he is to profit rightfully.

Yet Marx would have us believe that Locke means that it is only qua manual laborer that the homesteader is economically productive. As a corollary, Marx implies that it is only qua manual laborer that the homesteader gains rightful ownership over the land he worked and whatever financial benefits are to be reaped from such efforts. To apply Marx’s labor theory of economic value, the economic value of a commodity is directly determined by how much hard work went into it and how costly the commodity’s production was to the enterprise — regardless of the “scarcity” in the supply of the commodity or how much marketplace demand there is for it. An implicit corollary to that idea is that the one true “morally correct price” of the commodity is directly determined by how much the production or acquisition of the commodity imposed a financial cost to its vendors, the hard work that went into the production or acquisition of the commodity especially being included in that financial cost.

Years before Karl Marx, David Ricardo presented a similar idea — that the direct source of a commodity’s economic value is the cost expended to avail that commodity to the market. David Ricardo wrote, “The value of a commodity, or the quantity of any other commodity for which it will exchange, depends on the relative quantity of labour which is necessary for its production, and not as the greater or less compensation which is paid for that labour.”

I grant that the costs incurred by an entrepreneur influence the price the entrepreneur wants to set for her output insofar as the entrepreneur wants the price she charges for each unit to exceed the average cost it took her to produce that unit. But it does not follow that the economic value of a unit or its final free-market price are determined primarily by the costs the entrepreneur had to take on.

It may be the case that, too lazy to do any market research beforehand, I decide to produce units of glow-in-the-dark sunscreen, which I assume has good uses beyond that of a novelty item or gag gift. The result might be that, on average, it costs me $35 to produce each box, but consumers are only willing to purchase my product at the price of $10 per box. To apply Ricardo’s interpretation, the proper and correct price cannot be lower than $35 per box. Yet free-market economics recognizes that the proper and correct price of the glow-in the-dark sunscreen is set by the confluence of marketplace demand and supply, which means the proper free-market price is indeed $10 per box, and, insofar as I want to reduce my losses, I ought to settle for selling my inventory at $10 a box (the alternative is to keep the price tag at $35 per box and probably end up without any revenue at all).

I point out that if some value being “scarce” is a precondition to that value being properly recognized as private property, then the practicable and specific original designs enshrined in patents and copyrights successfully meet that criterion. Such practicable and specific original designs only arise as the result of the designer taking on a major financial risk in inputting the “scarce” resources of time and effort and testing equipment that are needed to produce such designs. Hence, the practicable and specific original designs end up being “scarce” in quantity and supply in turn. The economic value of the design is the result of the confluence of (a) marketplace demand for units produced according to that design with (b) the naturally “scarce” supply of practicable original designs from which any units can be produced. I merely point out that the “scarce” resources of hard work and testing equipment used up in the production of practicable original designs for the purpose of showing IP rights’ detractors that such practicable original designs are themselves “scarce.” That such efficacious, specific original designs are “scarce” indicates that the principles of marketplace demand and supply apply to them no less than they do to any other asset and that they, too, derive their economic value from the confluence of marketplace demand with supply.




Private Land Ownership Is an Obvious Right, But IP Is Not?
This brings to mind Timothy Sandefur’s repeated insistence that because a defense of intellectual property rights was not frequently included in Enlightenment philosophers’ treatises of natural rights, it follows that IPRs are not consistent with the Objectivist defense of IPRs. That is a non-sequitur for multiple reasons, the first of which is his false assumption that the Objectivist theory of individual rights is the same as the natural rights theory of Enlightenment philosophers. It is true that the Objectivist theory of rights draws from the Enlightenment philosophers’ natural rights theory, insofar as the focus is on rights to life, liberty, and private property to which a person cannot rightfully be deprived of force, but which are not entitlements that a needy person must receive from the State at the forcible expense of others. But as Craig Biddle has pointed out, the Enlightenment philosophers’ defense of “natural rights” to life, liberty, and property as being self-evident or granted by a deistic God, is too primitive for Objectivists to find satisfactory. The Objectivist theory of rights fills in the many gaps left by the Enlightenment’s natural-rights philosophers, including their insufficient attention to IPRs.

A presumption frequently conveyed in Sandefur’s derisory remarks on IPRs is that the right to private ownership over land is obvious — hence such a right being commonly defended by the Enlightenment’s natural-rights philosophers and the Objectivists after them — whereas a right to IP is often omitted from the treatises of the Enlightenment’s natural-rights philosophers on account of a right to IP being far from obvious. And such a right to IP being far from obvious, continues Sandefur’s presumption, is entirely consistent with his conclusion that a right to IP is just plain invalid. This assertion — that defenses of IP being infrequent in Enlightenment philosophers’ treatises on natural rights is sufficient to consider a defense of IP to be inconsistent with Enlightenment liberal philosophy — seems to be Sandefur’s other favorite rationalization for writing off IP rights as illegitimate, second only to the repeated falsehood that “scarcity” does not apply to the specific, detailed, nuanced, diagrammed designs that are copyrighted and patented.

This is silly; that an idea was not obvious to the Enlightenment’s natural-rights philosophers does not preclude that idea from being the result of the logical extension of the more rational aspects of their philosophy being taken to their logical conclusion. It was not obvious to Locke that his defense of freedom of thought and freedom of religion would also logically extend to atheists. It was not obvious to Thomas Jefferson that his defense of an individual’s rightful ownership of his own life would logically extend to nonwhites. Nor was it obvious to Albert Venn Dicey that his defenses of an adult male’s freedom should logically extend to women.

Moreover, that there should be a right to private ownership over land is actually not more obvious than the idea that a designer should have the first rightful claim of ownership over her design. Over 99.9 percent of the history of the genus Homo consists of such hominins being only hunter-gatherers. For over 89 percent of the history of Homo sapiens, this species has only performed hunter-gathering, functioning as nomads. The idea of a settling on the same plot of land for years was alien. Even when human beings finally began to farm plants as hunter-horticulturalists, and started the first villages, a long-term ownership over the land was strange. The convention was for hunter-horticulturalists to settle in a village for about 15 years at the maximum — by the end of those fifteen years, the number of parasites had built up, and the quantity of available game for food had dwindled, prompting the hunter-horticulturalists to abandon the village and set up another makeshift settlement elsewhere.

Over the past 5,000 years, when humans had finally decided that farming grains, rather than hunter-gathering, would be their main source of food, they developed an understanding of long-term settlement on real estate in manner dissimilar from what Locke and the Enlightenment’s other natural-rights philosophers envisioned. The first long-term land settlements consisted of chieftains and nobles proclaiming that a plot of land belonged not only to the people currently living, but also to their descendants and to the spirits of their long-dead ancestors, whom they had to consult when making decisions on how to alter the land. And those plots of land were “privately owned” only insofar as they were considered the joint property of one collective society as opposed to other collective societies.

The legitimacy of private land ownership is not even obvious to self-proclaimed libertarians who cite the Enlightenment’s natural-rights philosophers. That is why the early editions of Herbert Spencer’s Social Statics argues that land, not having been created by humans, cannot rightfully be privatized. It is also why there are self-styled “geo-libertarians” today who advance that very same conclusion. A right to private ownership over land is not fundamentally more obvious than a designer’s right to exclusive control over her specific original design — not to human beings in general or to Enlightenment-inspired natural-rights theorists in particular.

As I have discussed elsewhere, the homesteader’s right to own the land and other natural resources he improved — entities which had no owner prior to his improvement of them — is the original intellectual property right. Karl Marx obfuscates the meaning of Locke’s statement that the “labour” of the homesteader’s “body, and the work of his hands, we may say, are properly his,” and therefore what the homesteader “removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property.” By removing Locke’s use of the words labor, body, and hands, and putting special emphasis on these words in a new context, Marx bamboozles his readers into believing that Locke’s argument is that the physical motor movements employed by the homesteader are the direct cause of the addition of new economic value to the land. But the homesteader’s most essential investment in the improvement of the land was the intellectual effort — the intellectual labor — in studying the terrain and employing the proper plans that would yield the most efficacious results.

A homesteader who plans carelessly will yield pitiful results even as he exerts just as much physically strenuous effort as does another homesteader who invested considerable time and effort in learning the scientific properties of the terrain and plans accordingly. It is qua inventor and designer, not qua manual laborer, that the homesteader took resources that were no one’s private property and, from such resources, produced a form of economic value that had not existed previously. The same principle even applies to a hunter-gatherer who takes sticks and stones that no one had previously claimed as personal belongings, and then fashions them into a stone tool — it was not mostly the physical actions, but the hunter-gatherer’s use of his mind, that produced this new value. And it is not an accident that the socialists’ argument against privatized real estate is nearly identical to the IP-opposing libertarians’ argument against IP — that there being “gray areas” in the establishment of the boundary separating one piece of property from another is somehow enough to invalidate private ownership in this context altogether. A homesteader’s right to what he homesteaded is one of the earliest recognized intellectual property rights. And the intellectual property rights in the creation of such new value is the source of all wealth. It is therefore self-contradictory to claim that private ownership over improved land is a legitimate natural right whereas IP is not; private ownership over improved land is a form of IP.




Rightful Ownership of One’s Design Comes From Locke’s Designer-Entrepreneur-As-Owner Principle, Not From Labor Theory
In a fit of Orwellian mental gymnastics, many IP-haters have decided to focus only on two aspects of my argument — 1.) my pointing out all the time and effort and other costs that the inventor put into the practicable original design and 2.) my saying a homesteader or designer should have first claim of ownership over the new value she created. These detractors launch their attack while ignoring my larger point that the inputs of time and effort and testing-costs impose “scarcity” upon the practicable original designs and thereby meet the IP-haters’ own criterion for what can constitute rightful private property. Hence, they draw from Tom Palmer’s misrepresentation of defenses of intellectual property rights, mischaracterizing them as saying simply, The inventor worked really hard on her invention, and the simple exertion of hard work is sufficient to conclude that the inventor should own the invention. Palmer condescendingly labels that the “just deserts” argument and then repeats the falsehood I refuted in my prior essays — that a patent is a government-enforced monopoly on a general idea for a category of product.

Drawing from Palmer’s straw-man, the IP-haters have misrepresented my argument in particular as amounting to, The direct source of the economic value of an artwork or invention is the hard work and financial investment that the artist or inventor put into it, and that is sufficient grounds for considering the artist or inventor the exclusive ownership over the innovation, for which the artist or inventor deserves a government-enforced monopoly so that she can rake in big bucks from it. Implicit in that false accusation is the idea that I think that the proper free-market price that the designer charges — the royalties paid by licensees — is determined directly by the costs and financial risks that the R-and-D process imposes upon the designer. The idea is that my argument is a Labor Theory of Economic Value that is similar to David Ricardo’s at best and similar to Karl Marx’s at worst.

And in such mental gymnastics, they ignore my explanation how, prior to governmental recognition of any patents or copyrights, economic “scarcity” already applied to the same sort of practicable and specific original designs that would eventually be enshrined in patents and copyrights, and how this means that the default condition in any market is for there to be a “scarcity” in the quantity and supply of such practicable original designs, making them an economic value that is subject to marketplace demand and supply.

It is true that a person owns his or her own manual labor. As a corollary, it is rightful for someone sell his time and labor if he so chooses. Contrary to Marx’s insinuation that the entrepreneur appropriates the value of manual labor without paying the factory workers their worth, the entrepreneur already paid the factory workers the value of their work; that is their wage. The economic value of, and price for, manual labor (wages) is, too, set by the confluence of marketplace demand for labor with the supply of available labor. Insofar as the market is peaceable and free, everyone is paid what his job is worth, set according to that demand and supply. If, in practice, a laborer was paid less than what it was worth to him, he would quit.

Contrary to Marx, the entrepreneur and investors are not unimportant to the production process. By covering a business’s immediate debts, investors are the party that primarily takes on the financial risks associated with the enterprise in case it doesn’t succeed. Laborers take on the same financial risks as the investors only insofar as the laborers are investors into the business themselves. The entrepreneur provides important instructions to the laborers on what to do as they operate the equipment to convert raw materials into finished products; absent of the entrepreneur’s human-resources-management contribution, the labor and equipment and raw materials are not put into proper use by the firm and end up going to waste.

When the entrepreneur’s business brings in revenue, she must first pay her creditors, the first set of which are her employees to whom she contractually promised remuneration for the time and labor they sold her. The entrepreneur also pays for the equipment the laborers operate and the raw materials that the laborers convert into the finished product. Once the entrepreneur’s expenses are paid, the profit left over for the entrepreneur constitutes the customer’s payment to the entrepreneur herself specifically for the service of organizing the labor, equipment, and raw materials in such a manner as to supply the satisfaction of the customers’ and clients’ marketplace demand. One might say that insofar as the price the customer pays per unit is sufficient to cover what it cost the entrepreneur to produce that unit — the costs of the labor, raw materials, and equipment that went into producing that unit — the customer is reimbursing the entrepreneur for those very costs, and the profit left over is the customer’s direct payment to the entrepreneur for her creative contribution. And that profit is the market-based, supply-and-demand-caused economic value and price of the role that the entrepreneur played in supplying the satisfaction of marketplace demand.

Once improved land is properly recognized as the homesteader’s private property, the price the homesteader charges for it — be it the price of the land outright to purchasers, or the rent he charges to tenants — is set by the confluence of marketplace demand and supply. If would-be tenants valued only the land itself and none of the improvements, they would simply squat on wilderness area and become homesteaders themselves. The rent or price for which people are willing to pay for living on improved land is the fee that these people ultimately pay to the homesteader for the service of having used his mind to improve the land; that is economic value that had not previously existed in the land when it remained unimproved; the economic value is conferred upon the land by the homesteader himself. That is, the preexisting forces of marketplace demand and supply did not create the economic value of the homestead — the homesteader created that value — but once the homesteader has created new economic value by improving that land, that economic value that the homesteader created IS subject to the principles of supply and demand.

Likewise, once a designer is properly recognized as the designer’s rightful private property, the price the designer sets for it — be it the price she may charge to any firm for outright ownership of the design, or the license she charges to firms wishing to make use of her design — is set by the confluence of marketplace demand with supply. If would-be consumers valued only the physicality and tangibility of a novel —its ink and paper and binding — and not the intellectual efforts of the novelist, they would simply purchase ink and blank sheets of paper. If would-be consumers valued only the tangibility of a product — that it can be touched and that there is only finite number of units of the product in existence — and not the easy functionality in the product that was inputted into it by the inventor herself, then such consumers would merely purchase the raw materials from which the product was assembled.

Insofar as the royalty paid to the artist or inventor is incorporated into the price of each unit, the royalty paid to the artist or inventor for adding new value to a physical object that had not previously existed in the tangible substances from which the physical object was assembled.

That value did not come directly from the muscle power of the manual laborers who assembled units of the invention, nor even directly from the entrepreneur who managed and oversaw those manual laborers, even if that entrepreneur is more competent at human resources management than anyone else. It was the designer who provided the innovative design — the all-important set of specific instructions — for producing units that supply the satisfaction of marketplace demand to an extent greater than all comparably functioning units that were on the market prior to the new design’s introduction. And the world’s great manual laborers and human-resources-managing entrepreneurs would be unable to provide that new utility if not for the effort the inventor or artist expended in producing that new design.

I want to clarify further what I mean when I say that a particularly efficacious and particularly practicable original design produces a net increase in value in the economy. Throughout centuries, people have wanted to be able to communicate instantly with others miles away, not always needing to be directly face-to-face. An early method of such long-distance communication was making a fire and sending out smoke signals. However, given how difficult it is for someone to control a cloud of smoke, the number of different general messages that could be conveyed by a fire was quite limited. If economic value could be measured in “utility points,” we might imagine that when the knowledge and ability needed to make smoke signals became common in a hunter-gatherer society, access to this technology gave an average 100 utility points to a person.

Eventually there was an electrical method of instant communication over miles, coming in the form of telegraphs. One could send and receive such instant messages without such a great risk of being burned or inhaling toxic smoke. However, the messages sent through telegraphs could only come in the form of a series of short beeps and elongated beeps. A new esoteric language — Morse Code — had to be devised so that written English messages could be encoded into, and then deciphered from, a sequences of short beeps and elongated beeps. Each telegraph was a unit produced from a particular design, and it can be said that someone with ready access to a telegraph might gain an average 1,000 utility points from it.

Then Alexander Graham Bell introduced the telephone. It could transmit and receive electrical signals from distances comparable to those sent and received by telegraphs, but learning and deciphering a code such as Morse Code was no longer needed. There was the new convenience of simply being able to speak one’s own language and to be understood readily by anyone on the other end of the line who used the same language. Each telephone was a unit produced from a particular design, and it can be said that someone with ready access to a telephone might gain an average 1,500 utility points from it.

Once the point is reached that many people in the West can access telephones at least as easily as their predecessors could access telegraphs, it follows that the widespread availability of telephones supplies the satisfaction of marketplace demand to a greater extent than what occurred with the widespread availability of telegraphs. If a man who once was able only to use a telegraph obtained 1,000 utility points from that telegraph, and now obtains 1,500 utility points from his telephone, then he has experienced a net gain of 500 utility points. That net gain in 500 utility points per user is the net increase in economic value. And that net gain in economic value is not sufficiently explained by the mere manufacture and distribution of many units of the telephone. The manufacture and distribution of many units of the telephone would not have been possible if not for the Bell and engineers he later employed having devised the designs which provided the proper instructions to manufacturers on producing such demand-satisfying units. The inventor of the practicable new design deserves credit for the increase in the economy’s utility points — in the economic value available — and the royalties paid to the designer are for the service of creating that net increase in economic value.

Hence, we find that the preexisting forces of marketplace demand and supply did not create the economic value of a design — the designer created that value — but once that designer has created that new economic value, that economic value is subject to the principles of supply and demand.

It is a collectivization of real estate, consistent with much Marxian doctrine, that would cheat the homesteader. While unimproved land is not “scarce,” improved land is scarce as a consequence of the fact that very few people are willing and able to bear the financial risk that goes into inputting the time and effort and material resources necessary in rendering the land inhabitable and valuable in supplying the satisfaction of marketplace demand. The homesteader homesteads a plot of land on the implicit contractual condition that if other parties wish to make use of the same plot of land in which the homesteader invested efforts and other “scarce” resources, those other parties will pay the homesteader the price that the homesteader asks. That price usually comes in the form of rents that the land-improver charges to tenants. But if socialists got their way and land was recognized not as private property but only a public-domain commons, any would-be squatter would be able to invade the homestead, paying nothing. The result would be the homesteader recouping none of the costs of the “scarce” resources he invested into improvement of the land; he would be ruined. Every other would-be land-improver would see this and refrain from investing in their own land-improvement projects. Improved land would grow scarcer — “scarce” in the Malthusian context — and urban development would largely cease.

As the homesteader is not merely the manual laborer in Marx’s pontifications, but more importantly the creative designer and entrepreneur celebrated by John Locke and Jean-Batiste Say, it happens that the Marxian denial of a homesteader to his selfish private ownership over the economic value he imputed into his land would result in the ruination of the very same homesteader whom Marx cites as the inspiration behind his incessantly extolling the value of manual labor alone over the creativity of the designer and entrepreneur.

And the State refusing to recognize private ownership in practicable and specific original designs would have the same effect of a State refusing to recognize private ownership in improved land.



Conclusion
While impractical ideas are not “scarce,” and neither are possibly-helpful-but-still-unexamined-and-untested ideas, it happens that the practicable and specific original ideas enshrined in patents and copyrights are scarce. As stated before, these designs are “scarce” as an unavoidable consequence of the fact that very few people are willing and able to bear the financial risk that goes into inputting the time and effort and material resources necessary to produce the specific, original, detailed models from which better products are to be made. Again, these models are practicable enough to provide instruction on the production of new units that will supply the satisfaction of marketplace demand to an extent greater than do comparable units that are already on the market. The designer unveils the original design to the public on the implicit contractual condition that if other parties are to access and make use of the design, those other parties will pay the inventor or artist the price that the inventor or artist asks. That price usually comes in the form of royalties ultimately paid to the designer. But if patent-denouncing libertarians got their way, and practicable and specific original designs were recognized not as private property but something existing only in a public-domain commons, anyone would be able to pirate the design and pay nothing.

The result would be the designer not being reimbursed for costs of the “scarce” resources she used up in making possible her practicable and specific original design; she would be ruined. Many manufacturing firms will pirate an inventor’s design while paying nothing to the inventor, and, initially, it may seem that there is an increase of lower-priced units on the market that are produced from the inventor’s design. But the long-term result would be that every other would-be inventor or artist would observe this situation and refrain from investing in the creation of any designs that they would otherwise want to commercialize. Practicable original designs would become “scarce” in the Malthusian context—and innovations would largely cease. (It is not an accident that after the fall of Rome — where copyrights were recognized — progressed was relatively slow for centuries during the Middle Ages, only progress sped up again during the Renaissance, when patents on inventions were first recognized, and in which copyrights were being recognized once again.)

The reasons why a particular plot of improved land can and should command a high price on the supply side, is twofold. First, a plot of land is rendered inhabitable as a result of human effort and initiative, and only a few humans are willing and able to exert the effort and initiative that is needed. That consideration, by itself, is the source of the “scarcity” of improved plots of land. Secondly, each homesteader must make his own judgments in how to improve his land, resulting in different homesteaders making different choices, with some of these choices being better than others. Hence, although two homesteads may have started out as very similar pieces of geographic terrain, one might be more suitable than the other, in terms of supplying the satisfaction of marketplace demand, on account of one homesteader making wiser choices than the other.

Likewise, the reason why a particular patented original design can and should command a very high price — be it the royalty charged to licensees or the price a firm must pay for the whole patent itself — is twofold. First, a general idea is fleshed out and converted into a practicable original design as a result of human effort and initiative, and only a few humans are willing and able to exert the effort and initiative that is needed. That consideration, by itself, is a major cause of the “scarcity” of practicable original designs. Secondly, each inventor must make her own judgments. Hence, different inventors trying to solve the same basic problem will approach that problem from different angles and make different choices. Hence, although two patents might approach the same basic problem or even result in similar devices, one might be more suitable than the other in terms of the satisfaction of marketplace demand.

Thus, there is no basis to the accusation that my defense of the designer’s right to IP amounts to an attempt to apply the “labor theory of economic value” to inventions and artwork. I have not said that hard work or the inputting of “scarce” resources is the direct cause of the design’s economic value or the prices that the inventor should be able to charge. Both (1) the economic value of the practicable original design and (2) the prices that inventor may charge for her services, are the direct result of the practicable original design’s ability to supply the satisfaction of marketplace demand. That the inventor had to invest so much hard work and “scarce” resources in order to create her practicable original design, however, factors into both (a) the “scarcity” of practicable original designs as such, and (b) the particular original design’s ability to supply the satisfaction of marketplace demand.

Yes, the economic value of the inventor’s invention comes from how the invention supplies the satisfaction of marketplace demand — a new supplying of new satisfaction of marketplace demand that had not happened before. And here is why first dibs on rightful private ownership over the invention should go to the inventor herself: any time new economic value is created, first dibs on rightful ownership over that value must goes to the very same party that created that value. When land is made more valuable on account of the homesteader improving it, first dibs on ownership over the value in that land must go to the homesteader himself. To recognize that is not to deny that the direct source of the improved land’s value is its ability to supply the satisfaction of marketplace demand. It is just to recognize that the homesteader’s contribution is what made it possible for that improved land to supply any satisfaction of marketplace demand. Likewise, as an efficacious original design for a product generates a net increase in value in the economy, first dibs on ownership over that value must go to the party that created it: the designer herself.

Therefore, yes, John Locke’s Designer-Entrepreneur-As-Owner Principle applies here. Just as a homesteader holds the rightful first claim of ownership over his homestead on account of his imbuing it with new economic value, the designer holds the rightful first claim of ownership over her design on account of it being a new economic value she originated. That is entirely consistent with the consideration that once the design is created, the design’s economic value comes from the confluence of supply and demand and is subject to such supply and demand.



On June 14, 2018, I added the paragraphs about the homesteader’s right to the new value he created in the land, coming from the use of his mind, being one of the earliest recognized intellectual property rights.