economic theory and intellectual property

by Sebastian Benthall

I’ve started reading Picketty’s Capital. His introduction begins with an overview of the history of economic theory, starting with Ricardo and Marx.

Both these early theorists predicted the concentration of wealth into the hands of the owners of factors of production that are not labor. For Ricardo, land owners extract rents and dominate the economy. For Marx, capitalists–owners of private capital–accumulate capital and dominate the economy.

Since those of us with an eye on the tech sector are aware of a concentration of wealth in the hands of the owners of intellectual property, it’s a good question what kind of economic theory ought to apply to those cases.

One one sense, intellectual property is a kind of capital. It is a factor of production that is made through human labor.

On the other hand, we talk about ideas being ‘discovered’ like land is discovered, and we imagine that intellectual property can in principle be ‘shared’ like a ‘commons’. If we see intellectual property as a position in a space of ideas, it is not hard to think of it like land.

Like land, a piece of intellectual property is unique and gains in value due to further improvements–applications or innovations–built upon it. In a world where intellectual property ownership never expires and isn’t shared, you can imagine that whoever hold some critical early work in some field could extract rents for perpetuity. Owning a patent would be like owning a land estate.

Like capital, intellectual property is produced by workers and often owned by those investing in the workers with pre-existing capital. The produced capital is then owned by the initiating capitalist, and accumulates.

Open source software is an important exception to this pattern. This kind of intellectual property is unalienated from those that produce it.