Kinsella on Liberty Podcast, Episode 475.

This is my guest lecture for Saifedean Ammous's course Principles of Austrian Economics II | ECON104 (recorded May 7, 2020, I believe), also now on Saylor Academy. Transcript and summary and other notes below.

KOL441 | The Bitcoin Standard Podcast with Saifedean Ammous: Legal Foundations of a Free Society, Property Rights, Intellectual Property

KOL314 | Patents vs. Bitcoin: The Bitcoin Standard Podcast (Saifedean Ammous)

https://youtu.be/02wY_qL0qRU?si=HU40GGg8xu6Wfn3U

GROK SUMMARY

Summary of Economics 12 Seminar: Intellectual Property Discussion with Stephan Kinsella

Introduction to Intellectual Property and Scarcity

Timestamp: 0:01

In the ninth discussion seminar of Economics 12, Principles of Economics 2, host Saifedean Ammous introduces guest discussant Stephan Kinsella, who has written extensively on intellectual property (IP) and its justifications. The lecture focuses on Kinsella’s paper, which explores the legitimacy of property rights and why IP lacks a coherent basis. Ammous highlights the core issue of scarcity: property rights manage scarce resources, but ideas, being non-scarce, cannot be owned without controlling others’ bodies or property, violating individual rights. This is described as a “kill shot” to IP arguments, though other critiques are also explored.

Utilitarian and Natural Rights Arguments Against IP

Timestamp: 3:07

Stephan Kinsella elaborates on the incoherence of IP, arguing that information is a characteristic of owned resources, not property itself. Claiming ownership over ideas, like owning the “redness” of a ball, would absurdly grant control over others’ property. He traces IP’s origins to Locke’s labor theory of property, which confuses action with ownership, leading to flawed justifications by Ayn Rand and others. Kinsella critiques the utilitarian argument that IP stimulates innovation, noting the U.S. Constitution’s temporary monopoly grants were based on unproven assumptions. He argues that 200 years of data fail to show IP’s net benefit, with studies suggesting it distorts or depresses innovation.

Empirical Weaknesses and Market Failures

Timestamp: 7:44

Kinsella challenges the empirical case for IP, pointing out that proponents assume a market failure in innovation without government intervention. However, studies are inconclusive or show patents hinder innovation, costing billions annually in the U.S. alone. He criticizes reports like the Commerce Department’s, which claim IP-intensive industries drive GDP, for mistaking correlation with causation. Ammous adds that academic theoretical models often support IP without empirical backing, relying on simulated universes to justify claims of increased innovation, further highlighting the lack of real-world evidence.

Alternative Business Models Without IP

Timestamp: 19:13

Ammous argues that the assumption IP is essential for creators’ income reflects limited imagination. Musicians, for instance, earn most of their income from concerts and sponsorships, not record sales, as seen with artists from local bands to superstars like Madonna. Platforms like SoundCloud and YouTube allow free music distribution, boosting popularity and concert attendance, as evidenced by Iron Maiden’s use of BitTorrent data for tour planning. Authors can profit from physical books, courses, or speaking engagements. Without IP, lower legal costs would reduce prices, benefiting consumers and producers, with first-mover advantages and reputation sufficing for profitability.

Trade Secrets and Regulatory Impacts

Timestamp: 27:44

Kinsella discusses trade secrets as an alternative to patents, noting that patent law encourages disclosure over secrecy, undermining natural market advantages. The FDA’s regulatory system exacerbates this by requiring public disclosure during drug approval, negating trade secret benefits and justifying patents. He argues that removing both systems would allow trade secre...