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Intellectual Property and the Economics View

15 Dec 2017Essay Samples

The economics view of intellectual property sees the protection of intellectual property as both a good and a bad thing. The view recognizes that there needs to be protection and promotion of new ideas, but it also takes into account that many ideas can be worthless. In other words, the economics view believes that ideas have to be looked at for what they are worth, not just for being spoken. This is primarily because the protection of intellectual property increases cost, but such increase in cost can be disproportional to the real worth of the ideas themselves. Nonetheless, one thing has to be kept in mind: information is a public good. (Cooter and Ulen, 140)

The economics view believes that the government has to be cautious in finding a middle ground between how much it acts on the issue. The "how much" question is the issue here. The government does, absolutely, have to have a law for data protection. This is the "patent law". In this way, there are positive externalities in the sense that people must pay for the benefit of receiving ideas.

The danger, however, is that the holder of intellectual property can often receive benefits that exceed anything he/she has really contributed. This is why the government has to be concerned about the "how much" question. Indeed, should the creator of an idea receive benefits at the expense of other people that are simply worth nothing? This question is directly connected to the reason why Canadian law protects intellectual property with copyright law. (lecture notes, 412)

It is a given that we can not live in a society where we allow the stealing of ideas. The creators of intellectual property must have their property defended. That is why we have copyright law. But copyright laws, at the same time, are very difficult to enforce. This difficulty minimizes the benefits that the creator can have. This is also unfair. Meanwhile, the other extreme is harmful as well, in the sense that a hopeless writer can produce a worthless idea and yet receive all kinds of benefits for what people consider positive externalities from his work. The patent law that is now in existence makes creators feel more at ease, since it makes them aware that they will be protected and receive benefits. At the same time, there simply has to be a process in which ideas are assessed for their value. That is the economics view of intellectual property. In other words, this issue is about quality and moderation.

Thus, the economics approach sees the positive aspect of intellectual property, but it also emphasizes that it is not necessarily true that the more there is of it the better. Intellectual property is a constructive thing for a society in many respects. Intellectual property, however, also makes costs rise, and sometimes for unjust reasons. This is obviously one of the disadvantages, since we do not need inflation when the cause of inflation is not even real. An idea that is worthless that causes a charge is a drain on society. It is ridiculous if the price of books go up, and the majority of them say nothing new or interesting. The government, therefore, needs to practise the politics of selectivity. In this way, it will help intellectual property counter-act the shortcoming in the market by making certain things exclusive. (lecture notes, 412)

Overall, the economics view of intellectual property sees intellectual property as a positive externality. In some cases you cannot charge a fee for a positive externality, but in the case of intellectual property you can. The positive spill-over exists in something tangible; thus a cost can be applied. If someone refuses to pay that charge, then they can simply be excluded from having the positive spill-over, which in this case is the right to use or know about the idea. Here we see something that cannot be done by the market itself. In this very rare case we need the government to be active, for the enforcement of what we call "excludability" is very important in this case. Thus, the economics view is that there has to be reciprocal rights and obligations.

Sure enough, the patent law is an excellent thing, because it helps to support new and better ideas, and it rewards the producers of ideas. A society needs to give incentive to its talented people, because then talented people can nurture other aspiring artists, writers etc. So this is all good, as is the overall purpose of the patent law: to make sure no one gets a free ride and gets to have a positive externality without paying a cost. No, in this case, the person that does not want to pay the charge will be excluded.

It can be summed up in this way: if you don't want to pay, you cannot copy or utilize. Look for more papers at

We can conclude that the protection of intellectual property is crucial in any society that wants to function properly. The creators of ideas need to be protected and need to receive benefits for their contribution to society. Our law protects intellectual property with copyright law, patent law. It protects words and ideas in all fields. The economics view, meanwhile, stresses that there is a combination of good and bad in this whole issue. In the economics view, there has to be protection of ideas, but also protection against worthless ideas raising costs. The government needs to find a balance in dealing with this issue. People must pay for using other peoples' ideas. But people must also not pay too much for the protection of useless ideas. The economics view tells us that the government has to ask how much something is really worth.

Overall, the economics view of intellectual property is very practical. It gauges the importance of protecting new ideas. At the same time, it is shrewd in understanding that there can be many worthless ideas. This issue, therefore, is about quality and selectivity. A certain middle ground has to be found between how much the government acts. The illegal taking of ideas has to be stopped. At the same time, creators of intellectual property must have their property defended. This is exactly why there has to be a certain way for copyright law to work. Even though it is difficult to enforce, it has to be selectively applied. This is all about the question of balance.


  • Cooper, Robert and Ulen, Thomas. "Externalities, Property and Information," Law and Economics (Scott, Foreman, 1988) Lecture Notes. 

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