Against Intellectual Monopoly

to the monopolist rather than the
consumer, the consumer has little incentive to acquire information, while
the monopolist has a lot of incentive to see that the consumer has access
to it. So, we expect different arrangement for information provision (that
is, promotion) in competitive and noncompetitive markets. In the former,
the consumer pays and competitive providers generate information. In the
latter, firms subsidize the provision of information. Of course, the monopolist, unlike the competitive providers, will have no incentive to provide
accurate information. We rarely see Disney advertising that, however true
it might be, the new Mickey Mouse movie is a real dog, and we should go
see the old Mickey Mouse movie instead.

Notes
    1. Ed Felten's (2005) pizzarights are discussed at his blog, Freedom to Tinker.
    2. From WorldNetDaily, May 7, 2002; article available (accessed February 24, 2008) at
http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageld= 13805.
    3. Zimbabwe Independent (2003).
    4. The excerpt from The Economist is dated 1851: we found it quoted, with a tone of
paternal dismissal, by the very same magazine, The Economist (2005), which on page
18 of the same survey states, "On an individual basis this may be true [that patents
hurt instead of helping innovations]. But something changes when transactions
increase in volume and value. Sharing... can add more value to an innovation than
hoarding it might do. Yet effective sharing requires a property right that can be traded
in a market."
    0 tempora! 0 mores!
    5. The embodiment controversy is interesting but rather academic in nature. The
interested reader should consult Greenwood and Jovanovic (1990) for a survey of
the classical literature. Theory has not evolved much since then.
    6. Borges (1983), pp. 51-8.
    7. Scotchmer (2004), p. 33. This is an otherwise excellent and extremely useful textbook
on various aspects of the economics of innovation. Although Scotchmer does take the
standard model as her point of departure for a large part of the book, in various parts
her careful analysis comes quite close to some of the theoretical and policy positions
we propose here. We quoted out of Scotchmer's textbook because it is an excellent and
otherwise very coherent one; similar but much more confused arguments abound in
the literature.

    8. A number of authors are references in the brief overview of the history of economic
research on innovation. The conventional notion that ideas are a nonrivalrous public
good is a major theme of Romer's work (1986, 1990a, 1990b), and is reflected also
in Lucas (1988). Variations on this theme in the setting of monopolistic competition
can be found in the work of Grossman and Helpman (1991). These ideas build on
the earlier ideas of Allyn Young (1928), and especially the work of Kenneth Arrow
(1962), further developed by Karl Shell (1966, 1967).
    To give credit where it belongs, we should point out that Arrow's original argument was meant to lead to the conclusion that R&D, because it produced a public
good (nonrivalrous knowledge), ought to be financed by public expenditure. There
is nothing in Arrow's seminal paper, nor in his subsequent writings on the topic,
that suggests he had in mind intellectual monopoly as a solution to the allocational
inefficiency that he - in our view, incorrectly - detected in the production of knowledge. There is also an extensive microeconomics literature on patents that generally
begins with the assumption that innovation will not take place without a patent and
inquires into the optimal length and breadth of patent protection. Good examples
can be found in the work of Gilbert and Shapiro (1990) and Gallini and Scotchmer
(2001). In many cases, the assumption that patents are necessary for innovation is
not intended as an empirical principle, but arises from the fact that studying optimal
patents in a world where it would be better not to have patents at all is not terribly
interesting.
    9. Tirole (1988), p. 390.
    10. Barro and Sala-i-Martin (1999), p. 290.
    11. Boldrin and Levine (2007) show that, under twin assumptions of unbounded capacity and Bertrand pricing, when written as a sequential game between innovator
and imitators, the standard model has a unique subgame perfect equilibrium. In
such equilibrium, the innovator innovates and the imitators, facing a positive cost
of imitating, do not enter and let the first be a monopolist. Apart for a