Nobel Prize Winning Economist Writes About Intellectual Property

August 17, 2005

Joseph Stiglitz, a nobel prize winning economist, has an interesting piece in today's Daily Times of Pakistan about the impact of intellectual property and copyright on developing countries.

Without intellectual property protection, incentives to engage in certain types of creative endeavors would be weakened. But there are high costs associated with intellectual property. Ideas are the most important input into research, and if intellectual property slows down the ability to use others' ideas, then scientific and technological progress will suffer. ...The growth of the "open source" movement on the Internet shows that not just the most basic ideas, but even products of enormous immediate commercial value can be produced without intellectual property protection. By contrast, an intellectual property regime rewards innovators by creating a temporary monopoly power, allowing them to charge far higher prices than they could if there were competition. In the process, ideas are disseminated and used less than they would be otherwise.The economic rationale for intellectual property is that faster innovation offsets the enormous costs of such inefficiencies. But it has become increasingly clear that excessively strong or badly formulated intellectual property rights may actually impede innovation - and not just by increasing the price of research.Monopolists may have much less incentive to innovate than they would if they had to compete. Modern research has shown that the great economist Joseph Schumpeter was wrong in thinking that competition in innovation leads to a succession of firms. In fact, a monopolist, once established, may be hard to dislodge, as Microsoft has so amply demonstrated. ...Society has always recognized that other values may trump intellectual property. The need to prevent excessive monopoly power has led anti-trust authorities to require compulsory licensing (as the US government did with the telephone company AT&T). When America faced an anthrax threat in the wake of the September 11, 2001, terrorist attacks, officials issued a compulsory license for Cipro, the best-known antidote. Unfortunately, the trade negotiators who framed the intellectual-property agreement of the Uruguay trade round of the early 1990's (TRIP's) were either unaware of all of this, or more likely, uninterested. I served on the Clinton administration's Council of Economic Advisors at the time, and it was clear that there was more interest in pleasing the pharmaceutical and entertainment industries than in ensuring an intellectual-property regime that was good for science, let alone for developing countries. I suspect that most of those who signed the agreement did not fully understand what they were doing. If they had, would they have willingly condemned thousands of AIDS sufferers to death because they might no longer be able to get affordable generic drugs? Had the question been posed in this way to parliaments around the world, I believe that TRIP's would have been soundly rejected.Intellectual property is important, but the appropriate intellectual-property regime for a developing country is different from that for an advanced industrial country. The TRIP's scheme failed to recognize this. In fact, intellectual property should never have been included in a trade agreement in the first place, at least partly because its regulation is demonstrably beyond the competency of trade negotiators.


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