Against Intellectual Monopoly

imitate you take as inputs a copy of the idea, various
standard inputs available on the market, and your own skills; as output you
get productive capacity for the idea. You do this because you are trying to
collect as large a competitive rent as possible: making your copy of the idea a
bit better, or cheaper, than the one the original innovators are selling is one
way to increase your rents. Indeed, it is a very powerful way to increase your
rents: it is the essence of competition. So, at the end, imitation is nothing
else but an essential ingredient for competition, which may be characterized
as imitation with lots of good imitators.
    Intellectual monopoly greatly discourages imitation. For a monopolist,
the worst possibility is losing the monopoly. If an imitator improves upon
the product or learns how to produce it at cheaper cost, regardless of prior
licensing agreements, your competitor now has the upper hand and is a
threat to your monopoly. It is far more sensible simply to prevent imitation
in the first place, by aggressive legal enforcement of patents and other forms
of intellectual monopoly.
Notes
    1. The tragic situation of Zimbabwe is too well documented in the daily press to require
explicit references to be reported here. It got only worse and worse during the five
years we spent finishing this book.
    2. Somewhat less publicized than the Zimbabwean socioeconomic situation is the academic status of Michael Novak. According to the American Enterprise Institute's
Web site (at http://www.aei.org/scholars/scholarlD.44/scholar.asp) (accessed February 24, 2008), Michael Novak is the George Frederick Jewett Scholar in Religion,
Philosophy, and Public Policy and "researches the three systems of the free society -
the free polity, the free economy, and the culture of liberty - and their springs in
religion and philosophy." It might be imagined that a degree in economics would be a valuable prerequisite for such a position, but Mr. Novak's posted resume doesn't
include one.

    3. George J. Stigler was a great, if somewhat mordant, economist who, maybe because
of his indefatigable free market position, has often been seen as tolerant of monopolies; nothing could be further from the truth. He not only had little sympathy for
monopolies in general but also was one of the few academic economists writing
overtly against the Schumpeterian view of innovation, which we shall later cover
and criticize at length. In Stigler (1956), p. 269, he asks, "Is it monopoly or is it
competition, that brings more rapid economic progress?" and his answer leaves no
doubts: competition.
    4. Kling (2003). Larry Jones pointed out to us first that, until the Plant Variety Protection
Act of 1970 destroyed competition there too, markets for new plants and animal
species were a perfect example of our abstract model. Many colleagues at agricultural
economics departments around the country have since confirmed that what Larry
had learned growing up in Sacramento, California, applied elsewhere as well.
    5. That limited capacity is the source of economic rents even in competitive industries is
scarcely our original idea. We both learned of it as undergraduates when cost curves
were introduced and the partial equilibrium of an industry explained. We are not
particularly knowledgeable in the history of economic thought, but our impression
is that the first exposition of the concept is in the work of Alfred Marshall (1890,
book V), who coined the term quasi-rents to, unnecessarily, distinguish them from
the Ricardian rents accruing to inframarginal land. It was unnecessary because, in
both cases, rents emerge from the existence of factors of production that are fixed
at a point in time: land in one case and productive capacity in the other. In both
cases, the rents accrue to the owners of the fixed factor. That land may, in general,
not grow from one period to another, while productive capacity increases over time,
only implies that the rent accruing to land may not vanish even in the long run,
while rents accruing to the owner of productive capacity are eliminated, in the long
run, by capacity expansion brought about by the forces of competition. Marshall
appears to have also clearly understood that the ratio between the size of the market
and the indivisibility plays a crucial role in the adoption of innovations: "In almost
every trade many things are done by hand, though it is well known that they