Against Intellectual Monopoly

manuscript, which is necessarily the source of all future copies. Our original
manuscript is, therefore, like a capital good such as a shoe factory, and its
competitive price reflects the future profits it will generate. When a publisher
buys the book from us, the price it is willing to pay reflects the fact that it will
be able to make copies and sell them to other people, who can make copies
in turn. Absent copyright, how much would have a publisher be willing to
pay us for the manuscript? That would have depended upon its expectations
about how many other publishers we could have sold the manuscript to,
and how many copies of the book they would have brought to the market,
as well as some estimate of the potential market size, obviously. Sometimes
publishers' expectations are too optimistic, which leads to losses; some other
times they are too pessimistic, which leads to exceptional profits. If one
replaces the words "book" and "manuscript" with "plants" and "seeds,"
one gets a description of how the market for agricultural plants worked
before patents were introduced. If one leaves those words where they are,
one gets a description of how the market for English authors' manuscripts
worked in the United States until roughly 1890.
    So, while it is true that competition between publishers will eventually
result in a lower market price of the book, it is not true that they can profit at
our expense or we at theirs. The same is true for any other purchaser of the
book, should she decide to get into the business of making additional copies
by using the copy she lawfully bought. Whatever profit you could hope to
earn from selling our book will be driven to zero as you and other purchasers
compete with one another to pay us, the original writers, a price that reflects
the market value of the book to you. Whether we make many copies of our
manuscript and sell them directly to you, or whether we sell our manuscript
to a publisher makes no economic difference, at least as long as the market
for reproduction and distribution of books is more or less competitive.
We own the manuscript, and under the standard definition of property -
in the complete absence of copyright law - we can sell our manuscript at
whatever price the market bears. If potential readers exist and reproducing and distributing copies ofbooks is costly, our manuscript will fetch a positive
price - in the same way that Wolfgang Amadeus Mozart's or Ludwig van
Beethoven's uncopyrighted manuscripts fetched substantial amounts of
money in the competitive markets for musical scripts of eighteenth- and
nineteenth-century Europe.

    Initial copies of an idea are owned by the innovators, and those initial
copies are like roots of a tree from which all other copies will emerge like
branches of the same tree. Hence, when private property holds, and in the
absence of intellectual monopoly, competition lowers the price at which
copies of the idea will sell now and in the future. However, because all
competitors have to pay to obtain the idea directly or indirectly from the
original innovator, when the original manuscript is the only necessary input,
the original innovator collects all profits from the reproduction of copies of
his idea. When other inputs are needed beside the original manuscript, the
inventor collects a share of total profits. As the latter obviously is the most
frequent case, we should dwell carefully with it, especially to understand
when such share of profits is large enough to motivate the competitive
innovator to go ahead with her idea and when it is not.
    Economists refer to the net benefit to society from an exchange as "social
surplus." With intellectual property, the innovator collects a share of the
social surplus she generates; without intellectual property, the innovator
collects a smaller share - this is the competitive value of an innovation. When
such competitive value is enough to compensate the innovator for the cost
of creation, the allocation of resources is efficient - neither too few nor too
many innovations are brought about, and social surplus is maximized. One
can show mathematically that, under a variety of competitive mechanisms,
the private value accruing to an innovator increases with the social surplus:
inventors of better gadgets make more money. This is true even when the
private value becomes a smaller share of the social surplus as the latter
increases.
    Notice that