Boldrin and Levine (2005)
|Boldrin and Levine (2005)|
|Title:||Intellectual property and the efficient allocation of social surplus from creation|
|Author(s):||Boldrin, M, Levine, DK|
|Citation:||Boldrin, M., & Levine, D. K. (2005). Intellectual property and the efficient allocation of social surplus from creation. Review of Economic Research on Copyright Issues, 2(1), 45-67.|
|Link(s):||Definitive , Open Access|
|Key Related Studies:|
|About the Data|
|Data Description:||The authors assess the NIP (non IP) system and characterize its properties.|
|Data Type:||Primary and Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
In the modern theory of innovation, monopoly plays a crucial role both as a cause and an effect of creative economic activity. Innovative firms, it is argued, would have insufficient incentive to innovate should the prospect of monopoly power not be present. This theme of monopoly runs throughout the theory of growth, international trade, and industrial organization. We argue that monopoly is neither needed for, nor a necessary consequence of innovation. In particular, intellectual property is not necessary for, and may hurt more than help, innovation and growth. We show that, in most circumstances, competitive rents allow creative individuals to appropriate a large enough share of the social surplus generated by their innovations to compensate for their opportunity cost. We also show that, as the number of pre-existing and IP protected ideas needed for an innovation increases, the equilibrium outcome under the IP regime is one of decreasing probability of innovation, while this is not the case without IP. Finally, we provide various examples of how competitive markets for innovative products would work in the absence of IP and critically discuss a number of common fallacies in the previous literature.
Main Results of the Study
- An almost complete abolition of IP protection would lead to more creative activity, a more efficient allocation of its surplus, and higher social welfare.
- In the standard model of innovation, no innovation takes place under NIP (non IP). While these may not be, and are not in our view, the empirically relevant circumstances, they are those almost invariably adopted to argue for the necessity of strong IP legislation.
- There are abundant doubts on the established wisdom, according to which more IP protection is, from a social viewpoint, always better than less.
- The presence of IP protection may eventually lead to an ever decreasing amount of creation.
- A NIP systems allows the best creative individuals to earn large amounts of money.
- In the IP system, income inequality gets larger without gains for social welfare.
- The starting point of the economic analysis of innovation is to recognize that the economically relevant unit is a copy of an idea. Economically valuable copies of ideas do not fall from the heavens, like manna, but are the product of intentional and costly human efforts.
Policy Implications as Stated By Author
- Even if this should not be the concern of a policy aimed at maximizing social welfare, a NIP system would not necessarily impoverish creative individuals, but instead it would allow the best among them to still earn large amounts of money
- A great deal of common economic wisdom applies equally well to the economics of knowledge
- Property rights in copies of ideas is assured by the ordinary laws against theft – what is ordinarily referred to as “intellectual property” protects not the ownership of copies of ideas, but rather a monopoly over how other people make use of their copies of an idea.
Coverage of Study
|Level of aggregation:||Economic model|
|Period of material under study:||Non stated|