Believe it or not, Economics has a lot to say about such a controversial subject as it is nowadays Intellectual property. Not only regarding to Music downloads or Computer Software, is also related to other industries for example the Pharmaceutical.

For those who are interested in the topic, I’ll recommend you this free-downloading e-book from the Berkeley Electronic Press, named The Economics of Patents and Copyright .

Firstly is important to remark that there are several types of rights that Intellectual Property  embraces: patents, copyrights and the sui generis rights to protect plant varieties or semiconductor chips and databases. And too that all these ignore economics principles.

So it is compulsory to know why do all this rights exists?

Intellectual Law live-motive is mainly to incentive innovation and to help to simplify trade

Controversy takes place be cause of the nature of many of the protected goods, as they are commonly non-excludable and non-rival. (look up its definition in Priceless Goods). Is not difficult to see that it would be impossible to a Mathematician to determine who will be able to enjoy his Theorem and who won’t. As well as that for adding an extra consumer of his Theorem, the amount available for the rest won’t be altered.

This reasoning  backs up on the Economics analysis, for which the product of intellectual work is mainly information. And as you may guess, you can’t restrain it. What leads to think that any attempt to do it will represent an inefficiency.

Thus the Law faces the trade-off between giving incentives to innovators and minimizing the deadweight loss for society.

Hence an alternative solution might be subsidization. Mostly be cause that will permit avoiding the loss of efficiency, at the same time keeping high the incentives toward innovators and allowing everyone free-access. Of course this isn’t any newness, is  a regular practice in Science ( as grants) and Art ( through patronage).

Once and again the relevance of an accurate Cost-Benefits analysis is manifested. As the only way to settle the right amount to allocate to every “inventors” upon the social impact of his discovery.

Another option, mainly in matters of companies, could be using “firm’s secrecy”. As long as they will be able to keep theirs “technology” (including technics and know-how) in secret, there won’t be anybody capable of using it to make profits <no free-riders>. Coca-Cola might be a great example.

Permiting secrecy to be the only regulation would show clearly the uselessness of having a compound structure of laws to solve the impossibility of exclusion problem, and at the same time there will be a system that gives incentives to progress.

this will be continued…

 By Laura M. Gonzalez