Tag Archives: Buchanan

New Dourado and Tabarrok Paper on Intellectual Property

I’m pleased to announce that Alex Tabarrok and I have a new working paper out from the Mercatus Center today, “Public Choice and Bloomington School Perspectives on Intellectual Property.” The paper will appear in Public Choice in 2014.

Here’s the abstract:

We mine two underexplored traditions for insights into intellectual property: the public choice or Virginia school, centered on James Buchanan and Gordon Tullock, and the Bloomington or Institutional Analysis and Development school, centered on Elinor Ostrom and Vincent Ostrom. We apply the perspectives of each school to issues of intellectual property and develop new insights, questions, and focuses of attention. We also explore tensions and synergies between the two schools on issues of intellectual property.

The gist of the paper is that the standard case for intellectual property—that a temporary monopoly is needed in order to recoup the sunk costs of innovation or creation—ignores issues raised by the two schools we investigate.

From a public choice perspective, a temporary monopoly provides enormous opportunities for rent seeking. Copyright and patent owners are constantly manipulating the political environment to expand either the duration of the monopoly or the scope of what can be monopolized. We document the evolution of intellectual property in the United States from its modest origins to its current strong and expansive state.

From a Bloomington perspective, the standard case for IP wrongly treats the commons as a kind of wasteland. In fact, numerous innovations and sprawling creative works occur without monopolization—just look at Wikipedia. Innovation occurs when the right institutional structures are in place, and intellectual property that is too severe can hamper the smooth operation of these institutions. Too much IP can harm as much as too little.

Read the whole thing, cite it copiously, etc.

Is There a Cybersecurity Market Failure?

That is the title of my Mercatus working paper (PDF), released yesterday. Basically, it aims to be a short course in public economics for tech policy analysts. Almost all policy wonks have taken Econ 101, perhaps even a graduate version, in which they learn that externalities can cause markets to get prices wrong, and that this can result in market failure. What my paper stresses is that this link, from externality to market failure, is not automatic.

The paper is heavy on “what Coase really meant” (lots of smart people get this wrong), on non-property institutions and norms à la Ostrom, and on the often-ignored inframarginal externality as discussed by Buchanan and Stubblebine. By applying these ideas to cybersecurity policy, I try to show that it is not at all as obvious as many analysts think that there is significant scope for welfare-enhancing regulatory intervention. The point is not that there is literally zero market failure, but that proponents of cybersecurity regulation have not done the work they need to to show that market failure exists, if it exists. Indeed, many policy analysts may not even realize they are missing something. I hope that this paper will correct that and lead to a more humble and cautious approach to market failure among its readers.

I have plans for more work on tech policy in the future. Internet security and governance is a great research topic for young, tech-savvy economists interested in polycentric governance and institutions. If you’re interested in doing research in this area, let me know, I may be able to help.