Against Intellectual Monopoly

leaders are overtaken by the big monopoly,
Microsoft, and since then ("then" was ten years ago) there has been no
further overtaking. When the initial leaders are overtaken, they are far
from being monopolists, either de facto or de jure.
    • It takes about seven years for the first lead to change hands and, as far
as we can tell, infinity for the second leader to be overtaken.
    • All the reported examples of dynamic competition, either in the software industry or elsewhere, pertain to the early stages of a new industry,
when intellectual property protection is low and imitation and competition are high. Had the spreadsheet been patented, would Lotus 1-2-3
have been overtaken by Excel?
    As we have repeatedly insisted, once the industry matures and intellectual
property rights are obtained, monopolies tend to become very long lasting.
When was the last time that someone overtook the Hollywood studios or
the Big Five in the movie and music industry? How long would have we
waited for someone to overtake AT&T and free the telecommunication
industry if its monopoly had not been torn apart by an antitrust action?
More generally, we ask the reader to perform the following mental exercise:
how many industries can you mention where the mechanism described in the Schumpeterian model has been at work, with innovators frequently
supplanting the incumbent monopolist, becoming a monopolist in turn, to
be killed shortly after by yet another innovator?

    The basic Schumpeterian argument is oblivious to the fact that once
monopolies are established, rather than allow themselves to be swept away
by competition, they generally engage in rent-seeking behavior - using
their size and political clout to get the government to protect their market
position. How, for example, does the expenditure of money on lobbyists by
drug companies that are fighting for extensions of their patents figure into
the Schumpeterian picture?
    Although Schumpeter's arguments were widely and broadly expounded
in the industrial organization and growth literature forty to fifty years ago,
they were swept away by the hard facts of the 1960s and 1970s when the
monopolized sectors of the U.S. economy stagnated without innovating,
while growth and innovation were flowing from small-sized firms, and
everybody agreed that "small is beautiful." One should only thank our good
luck, or the courts of the time, that Apple and IBM could not even conceive
of patenting the PC and its crucial components back in the 1970s. Both the
blossoming of the PC-hardware industry and the eventual demise of IBM
and Apple as the dominant firms are due to the effective lack of patent protection on production processes and on most crucial components. Exactly the
opposite of what the misleading Schumpeterian principles of drastic innovation and patents are beautiful would have predicted. Regrettably, such
principles have made a comeback under the cover of "intellectual property
is good for innovation": as usual, nothing is particularly new under the
sun, at least in the land of economic fallacies. Even Schumpeter himself
admitted, "It is certainly as conceivable that an all-pervading cartel system
might sabotage all progress as it is that it might realize, with smaller social
and private costs, all that perfect competition is supposed to realize."32
The Idea Economy
    It is often suggested that ideas are becoming increasingly important as a
component of the economy. Pundits and academics alike theorize about
the new economy, the weightless economy, the global information economy, and so forth. They cast images of a world where machines, besides
reproducing themselves, produce all kinds of material goods and services
as well, while humans engage in creative activities and in the exchange
of ideas. Although this sounds fascinating, like every utopia, it is mostly
a pipedream: any reader of Karl Marx's Grundrisse would recognize his description of communism to match closely that of an idea economy.33
The question is, which kind of institutional arrangements are advocated
for travel to these gardens of utopia, and are the flowers of such gardens as
enchanting as their advocates tell us?

    Our suspicions are raised by the fact that, customarily, the visionary
preacher of the idea economy is also a staunch supporter of intellectual
monopoly, and of ever stronger and stricter intellectual monopoly laws.
This seems to have the implication that either,