A Cautious Defense of Intellectual Oligopoly with Fringe Competition
Mark A. Lemley
Stanford Law School
May 1, 2009
Review Law & Economics, Vol. 5, No. 3, 2009
Stanford Law and Economics Olin Working Paper No. 374
Michele Boldrin and David Levine offer a strong attack on intellectual property (IP), which they call “intellectual monopoly.” In their view, IP is not necessary to encourage invention or creation. Quite the contrary, they argue that we get innovation from competition, not monopoly. Further, because monopoly imposes well-recognized social costs, we are better off without it if it doesn’t in fact spur new innovation.
Boldrin and Levine make a plausible case on their own terms. Nonetheless, I think their terms are misleading. IP rights are rarely if ever “intellectual monopolies.” Most patents, to say nothing of most copyrights, create no economic rents. What this means is that we can’t assume that IP rights generally impose deadweight losses on society. They cause deviation from atomistic, perfect competition, but they don’t cause monopoly pricing. With a small number of exceptions, therefore, they don’t cause the social harms Boldrin and Levine correctly associate with monopoly pricing.
Number of Pages in PDF File: 13
Date posted: May 21, 2009 ; Last revised: February 6, 2011