Against Intellectual Monopoly

few extraordinary circumstances, we do not claim that this is an interesting, let alone realistic,
description of real markets. On the contrary: the outcome described is a patently
absurd portrayal of the way innovators and imitators behave absent intellectual
monopoly. Nevertheless, because it is the straightforward logical implication of the
standard model's fundamental assumptions (unbounded capacity and marginal cost
pricing), this analytical result strongly suggests that at least one of them should be
thrown away. Personally, we believe both should be thrown away, which is what we
have done in most of our research. In our quoted paper, we show that even getting
rid of marginal cost pricing alone leads to much more consequential results. On a
different note, this also suggests that users of the standard model never seriously
bothered with their homework of finding out what their preferred assumptions
imply.
    12. Ivan P'ng showed us the wheeled suitcase example.
    13. Becker (1971).
    14. Ellison and Glaeser (1997, 1999).
    15. Acemoglu and Angrist (2000).
    16. Ciccone and Peri (2002).
    17. Castiglionesi and Ornaghi (2004).
    18. Cavalli-Sforza (1996).

    19. Cipolla (1972), p. 48.
    20. Cipolla (1976), p. 154.
    21. Cipolla (1976), p. 158.
    22. We complain extensively about the schizophrenic way in which academic economists, and their alumni in business, politics, and the media, keep treating information and its transmission. The following quotation from the textbook from
Hirshleifer and Riley (1992), p. 276, shows we are not alone in stressing the very
costly nature of information transmission. What remains puzzling is the little use
economists are willing to make of this fact.
    Only rarely does mere "disclosure" suffice to convey a message; something more
active is typically required of both sender and receiver. Teachers work hard preparing
lectures and textbooks; students grind away trying to understand them. In our earlier
analysis we treated information as a transparently valuable but fugitive commodity,
always liable to escape unless closely guarded. But of at least equal importance are
types of information whose nature and value are not transparent, that are hard to
transmit even to desirous users, and hard for them to absorb even when offered
freely.
    23. The R&D surveys referred to are in Levin et al. (1987) and Cohen and Walsh (1998).
    24. Information revelation in the strategic patent process is studied by Anton and
Yao (2000), Battacharya and Ritter (1983), Horstmann, MacDonald, and Slivinski
(1985), Okuno-Fujiwara, Postlewaite, and Suzumura (1990), and Ponce (2003). We
discuss the effect of secrecy on capacity choice in Boldrin and Levine (2004a).
    25. Okuno-Fujiwara et al. (1990).
    26. Ponce (2003).
    27. Boldrin and Levine (2004a).
    28. Moser (2003, 2005).
    29. Available at http://www.gnu.org/philosophy/amazonpatent.html (accessed February 24, 2008).
    30. Schumpeter's celebration of monopoly can be found in his (1943) work. A modern
elaboration is in Aghion and Hewitt (1992).
    31. Evans and Schmalensee (2001).
    32. Schumpeter (1943), p. 90.
    33. Karl Marx's description of communism can be found in Marx (1857).
    34. DeLong and Froomkin (1999).
    35. Boldrin and Levine (2005b); Quah (2002).
    36. At the time we first wrote this chapter, around 2003, we privately estimated that
it would be a decade before the quality of home-produced movies caught up to
the studio variety. However, this estimate has subsequently turned out to be off
by ten years. The production quality of the movie Star Wreck, available online at
http://www.starwreck.com, is comparable to a $200 million special effect blockbuster
from the studios. Because they thank six sponsors, one for "lend[ing] us a Pinnacle
DV500 ed[i]ting card" that retails for about $800, we can safely assume they didn't
spend $200 million making this movie. To quote from the Web site:
    Q: Damn, you must be very rich when you can afford a film like this.... Huge sets,
studios, actors and render farms!

    A: What sets? The bridge sets are all virtual. The on-location shoots were made at
locations that didn't cost any money (schools, public places etc). The "bluescreen
studio" is actually a small piece of blue linoleum in Samuli's living room....
    For Samuli this is a somewhat costly hobby, but as a movie it's still very close
to a zero budget. The most expensive part of the production has been keeping the
computer equipment up to