Intellectual Property and Efficient Assignment from Creation

In the modem theory of innovation, monopoly takes a vital role both as a source and an effect of creative economic behavior. Creative firms, it is said, would have insufficient incentive to innovate should the prospect of monopoly power not be present. This topic of monopoly goes throughout the theory of growth, and industrial organization. We say that monopoly is neither needed for, nor a necessary consequence of innovation. Specially, intellectual property is not essential for, and may damage more than benefit, creation and growth. We point out that, in most situations, competitive rents allow creative individuals to allocate a large enough share of the social surplus generated by their creations to compensate for their opportunity cost. We also show that, as the number of pre-existing and IP protected thoughts needed for a creation increase, the equilibrium effect under the IP regime is one of decreasing probability of creation, while this is not the case without IP Finally, we can get the conclusion that first, in the sense that if they were all to be erased, the idea would no longer have any economic value, and, second, in the sense that the copies are relatively good substitutes for each other: whether a copy of an idea is the original copy or the hundredth copy, it is equally economically useful. From the perspective of the functioning of markets, then, property rights in copies of ideas is assured by the ordinary laws against theft - what is ordinarily referred to as "intellectual property" protects not the ownership of copies of ideas, but rather a monopoly over how other people make use of their copies of an idea.