Social Well-Being and IP Theft: A Dynamic Economic Analysis

10 Pages Posted: 18 Aug 2012

See all articles by Thomas Randolph Beard

Thomas Randolph Beard

Auburn University - Department of Economics

George S. Ford

Phoenix Center for Advanced Legal & Economic Public Policy Studies

Lawrence J. Spiwak

Phoenix Center for Advanced Legal & Economic Public Policy Studies

Michael L. Stern

Auburn University; Phoenix Center for Advanced Legal & Economic Public Policy Studies

Date Written: March 1, 2012

Abstract

One of the most vexing issues of late is how to develop an effective yet socially-acceptable policy response to stop the rampant and expanding theft of intellectual property (“IP”) using the Internet. While much of the debate is of a populist and unsophisticated nature, there are in fact some significant and legitimate philosophical disagreements surrounding IP protection. For example, since IP is typically non-rivalrous in consumption, the theft of IP may be (and has been) construed as merely a transfer — what the copyright owner loses the thief gains. Some argue, consequently, that IP theft is economically of little significance. In this paper, using a very conventional dynamic general equilibrium framework, we show that the theft of IP reduces social well-being, even if we count the benefits to the thief and assume theft requires no resources. In effect, theft acts as a distortionary tax on sellers, and this distortion is not remedied by merely returning the proceeds of the theft as a lump sum transfer to consumers. As such, as the debate moves forward on how to develop effective mechanisms to prevent IP theft, we may set aside the argument that on-line theft of IP causes no real economic harm and therefore no foul.

Keywords: Intelectual Property, IP Theft, SOPA

JEL Classification: O34, O38

Suggested Citation

Beard, Thomas Randolph and Ford, George S. and Spiwak, Lawrence J. and Stern, Michael L., Social Well-Being and IP Theft: A Dynamic Economic Analysis (March 1, 2012). Phoenix Center Policy Bulletin No. 32. Available at SSRN: https://ssrn.com/abstract=2131458

Thomas Randolph Beard

Auburn University - Department of Economics ( email )

415 W. Magnolia
Auburn, AL 36849-5242
United States

George S. Ford

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

Lawrence J. Spiwak (Contact Author)

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States
202-274-0235 (Phone)
202-318-4909 (Fax)

HOME PAGE: http://www.phoenix-center.org

Michael L. Stern

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States

Phoenix Center for Advanced Legal & Economic Public Policy Studies

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

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