The draft intellectual property (IP) rights chapter of the Trans-Pacific Partnership (TPP) agreement being negotiated between the US and 11 Pacific nations was published by Wikileaks on 9 October.
The 60-page document covers topics that economists normally don’t worry about: trademarks, copyright, patents and the enforceability of claims on property that has no physical form.
The TPP, and its equivalent for the US and the EU named the Transatlantic Trade & Investment Partnership (TTIP), has been attacked principally because of the secrecy in which it has been negotiated. Economists have generally expressed sympathy with them since they aim to remove obstructions to trade in goods and services. They echo the goals of the World Trade Organisation (WTO), the free-trade body that started operating in 1995. Generally, economists like the WTO,
But there a solid grounds for economists to focus more attention on the IP elements of TPP and TTIP. As Economics2030 explains, the validity of IP is based on two arguments:
- Natural rights. This posits that creations of the mind are entitled to protection just as tangible property is. One problem with this approach is that it involves arbitrary distinctions, often between a concept that is discovered and one that is invented. In patents law, a distinction is made between laws of nature, which cannot be patented and practical applications that can be. The full application of the idea that someone has the right to claim ownership over an idea they discovered or developed would involve constructing rules that would prevent practically anything happening. In principle, property rights must have discernible borders and should apply to scarce resources. But ideal objects are not scarce. The principles supporting private ownership of tangibles do not validate intangibles. Economists rarely consider this issue even though property rights are essential to the operation of the models they study and advocate.
- Utilitarian. This approach is conventionally favoured by economists. It involves arguing that the positive results from allowing IP rights offset the losses, including the restriction on individual freedom. There are three objections to utilitarian defences of IP: ethical (ie it’s morally wrong); it involves interpersonal utility comparisons (that the loss of welfare for someone prevented from using an idea is more than offset by the gain to the owner of that idea) and cost-benefit (that the net economic benefit of IP rights are positive). The cost-benefit argument is unproveable and there is evidence that IP laws actually reduce innovation.
These issues should encourage economists to think more seriously about IP. Usually, they either accept the pro-IP arguments without much thought or they focus on the perceived negative consequences of transnational IP-enforcement deals like TTP and TTIP.
Economics2030 calls on economists to investigate more profoundly the idea of IP and its validity in economics. They should also consider with greater rigour the effects of the rise of IP and other forms of intangible capital on the working of the global economy, the capacity of governments to tax corporations efficiently and the distribution of wealth and income in economies where intangible capital is dominant.