Against Intellectual Monopoly

eventually, we must reach
a state where copyrights and patents, and the loss of freedom they entail,
becomes ubiquitous, or we must somehow move beyond capitalism to some
sort of socialistic world in which we no longer attempt to profit from our
individual enterprises, but rather all agree to produce for some sort of
common good, or perhaps even just for our own good with the hope that
this somehow turns out to be the common good as well.
    An example of this "modern" perspective can be found in DeLong
and Froomkin's "deconstruct[ion of] Adam Smith's case for the market
system."34 To summarize their argument, excluding people from using an
idea is difficult because digital data is too easy to copy, and in any case,
digital goods are nonrivalrous, meaning that it is not a good idea from a
social point of view to try, given that copies are so cheap. Then they argue
that the value of digital goods is less apparent to the consumer than that
of traditional goods. They conclude from this analysis that we are facing a
massive market failure, and they look for remedies.
    The reason why digital goods are complex goods about which consumers
are badly informed seems to us more an assertion than a proven fact. Why
a video game or a cellular phone service is any more complex than a recent
BMW we do not know. Is a digital book more complex than a regular book?
Is music in MP3 format more complex than a CD? Is purchasing underwear
online from Victoria's Secret riskier than doing it by telephone from a
catalog? As one starts to think of concrete examples, it is easy to realize that
the additional complexity of digital goods with respect to the usual ones is
just empty rhetoric. When our two children were, respectively, nineteen and
fifteen years old, neither one seemed to have much of a problem purchasing
digital or nondigital goods online. In fact, they did so much more easily
and efficiently than by going to the local mall (among other things, because
neither was yet allowed to drive around town). They seemed to be able to
read the instructions online equally as well as on the piece of paper that
comes with regularly wrapped goods.
    As to the issue of whether digital data is too easy to copy, is it true that
technological change - the Internet revolution - will lower the costs of copying and distributing ideas so much that competitive rents are no longer
significant?

    In a dynamic world in which capacity expands over time, such as that
studied by Boldrin and Levine or Quah,35 ideas may eventually become
freely available to everyone. But time elapses before this happens, and in the
interim, the idea sells for a positive price, with the rents going to the original
innovator. What is the implication of technological change for these rents?
Do competitive rents drop to zero, so that without strengthened intellectual
monopoly, ideas will cease to be produced?
    First, notice that for patentable ideas, this discussion is largely moot.
The time required to transmit a blueprint or engineering diagram lies not
in the difference between the several days it might take to deliver by mail
and the several seconds by e-mail, but rather in the amount of time it
takes for the receiver to read and understand the technical specifications.
Indeed, in the case of many patentable ideas, the cost of redistribution may
well be increasing over time. Certainly the idea of how to build a wheel is
much easier to communicate than the idea of how to build an atomic bomb.
Basically, inventions range from the trivial, such as the idea of a using a single
click to buy an item on the Internet, to the complex, such as Karmarkar's
algorithm for solving linear programming problems. Trivial ideas are cheap
to communicate, but, of course, they are also cheap to create. Complex ideas
are expensive to create, but they are also difficult to communicate, so they
are scarce and will command a substantial premium for a long period of
time. In both cases, the cost of producing the ideas and the competitive rents
are commensurate, and some ideas will be produced without intellectual
monopoly, while perhaps others will not.
    In the case of copyrightable creations, it can be argued that technological change - computers and the Internet - are greatly lowering the cost of
reproduction, and so the conventional model in which ideas trade instantly
at zero price is relevant. However, it is cost relative to the amount of competitive