Friday, June 5, 2009
Posted by D. Daniel Sokol
Mark Lemley (Stanford Law) challenges Michele Boldrin and David Levine in Intellectual Oligopoly: A Cautious Defense of Intellectual Oligopoly with Fringe Competition.
Boldrin and David Levine offer a strong attack on intellectual property
(IP), which they call “intellectual monopoly.” In their view, IP is not
necessary to encourage invention or creation. Quite the contrary, they
argue that we get innovation from competition, not monopoly. Further,
because monopoly imposes well-recognized social costs, we are better
off without it if it doesn’t in fact spur new innovation.
Boldrin and Levine make a plausible case on their own terms. Nonetheless, I think their terms are misleading. IP rights are rarely if ever “intellectual monopolies.” Most patents, to say nothing of most copyrights, create no economic rents. What this means is that we can’t assume that IP rights generally impose deadweight losses on society. They cause deviation from atomistic, perfect competition, but they don’t cause monopoly pricing. With a small number of exceptions, therefore, they don’t cause the social harms Boldrin and Levine correctly associate with monopoly pricing.