Circular arguments redux

My co-blogger Jonathan Wilde brings to my attention this article by John T. Kennedy of No Treason!, in which the author tries to use a contractual argument to justify intellectual property rights. But as I mentioned previously in a post here on Catallarchy.net, this argument is necessarily circular. To wit:

Assume that contract rights are universally agreed upon, but intellectual property rights are not. Now assume that individual A agrees to trade individual B the rights to use a piece of intellectual property X in exchange for quantity of money Y, on the condition that B does not share X with anyone else. Based on our initial assumption, this contract is universally agreed upon as valid.

However, now assume that individual C enters the picture. Individual B gives, sells or trades X to C. This clearly violates the contract between A and B, and we would all agree that A can hold B responsible for contract violation. But did C do anything wrong? C was not a party to the contract between A and B.

At this point, the defender of intellectual property rights argues that C did something wrong because C's ownership of X without payment to A violates A's property rights. But this is begging the question! We cannot prove that intellectual property rights are valid by pointing to a contractual relationship and simply assuming the validity of intellectual property rights within the process of arguing for contract rights.

In other words, if we do not first assume that intellectual property rights are valid, C has done nothing wrong. He did not violate any contract because he was never a party to a contract. If the validity of intellectual property rights are to be proven, they must be proven in some other way.

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What I'm not clear about

What I'm not clear about your argument is this:

Is the contract between A and B still valid? If B shares X with C, I can see how C has done nothing wrong. But has B done something wrong? Is a contract such as this valid at all?

B has violated his contract

B has violated his contract with A by sharing with C. But C has done nothing wrong. B could still be held liable for contract violation, but what can A do to C?

This seems fairly similar to a case involving the sale of stolen property, except much more complicated because C could replicate and distribute millions of copies of the intellectual property before A even knows that B violated the contract.

Ahh. Well, I don't think

Ahh. Well, I don't think Kennedy is making an argument for C to be held liable. So I think we all agree.

Well, the problem is that if

Well, the problem is that if C is able to legally replicate and distribute millions of copies of the intellectual property, the entire concept of intellectual property as an enforceable claim collapses.

I'll leave this one to the

I'll leave this one to the lawyers. Just a footnote: Micha mentions C's role is like someone aquiring stolen goods, only more complex. From a law and econ perspective, we prohibit buying stolen goods in order to lower the returns to theft, and discourage it. Isn't that an argument for making what C does wrong, and holding him liable for accepting X from B?

I bet we could learn from looking at some common law decisions here, to see how actual judges reason these issues. Any lawyers want to make themselves useful?

Andrew, I think it depends

Andrew, I think it depends on how we want to look at the issue. If we look at it from a consequentialist, social-welfare maximizing economist's viewpoint, then it may or may not be the case that holding C liable will maximize social welfare.

But if we look at it from a deontological, rights-based viewpoint, as the author of the above-mentioned article wishes to do, then we can't use consequentialist arguments to justify holding C accountable. We must first develop some kind of theory as to why C's actions are wrong. Since C is not a party to the contract, and since the argument we are making is an attempt to justify intellectual property rights, we cannot use the existence of intellectual property rights as an argument against C, since that is the very thing we are attempting to prove.

Assume A rents B his car and

Assume A rents B his car and B sells it to C. Has C violated A's property rights? Is it inconsistent with property rights to say that A's only claim is against B?

Now of course if C is conspiring explicitly or effectively with B to violate A's rights then he is liable.

You write: "At this point, the defender of intellectual property rights argues that C did something wrong because C's ownership of X without payment to A violates A's property rights."

But I don't argue that for IP or TP (tangible property). In either case if C acted in good faith and did not conspire with B to violate A's property rights then he has not violated A's rights.

How injured parties can be made whole or recover damages is a practical economic question and the answer may vary according to circumstance.

An AnCap judge might well decide that the sale of the car to C was not in fact a sale and that A's property must be returned and C has a claim against B for the price. Or if C had sold the car and it had passed to others in a series of good faith transactions the judge might decide A's only claim was against B.

If the property in question were an original novel instead of a car then it may be very reasonable to require C to cease copying and distributing the novel. Then any claim C had would be against B. If distribution has proceeded beyond a certain point then A's rights may be unsalvageable.

"B has violated his contract

"B has violated his contract with A by sharing with C."

What are the damages? What harm is done to A if B shares something that is not A's property?

Suppose B signs a contract to be A's slave for life. What damages can A claim if B breaches? Is he entitled to keep B a slave?

"Well, the problem is that

"Well, the problem is that if C is able to legally replicate and distribute millions of copies of the intellectual property, the entire concept of intellectual property as an enforceable claim collapses."

Not at all, it merely demonstrates that some property rights are more difficult to secure than others. In theory I could still protect my rights to a novel by having the reader post a large bond which be forfeit upon violation of my rights. This won't happen for novels because it is impractical, but it can happen for some IP.

Consider TP. If B sells C A's house the judge may find the sale defective and order the house returned. If B sells C A's pizza and C eats it few judges will find that C must return a pizza to A. The fact that practical remedies vary with different kinds of TP does not invalidate property rights, now does it?

Micha, I like your

Micha,

I like your arguments. I don't think one can justify intellectual property rights to the extent that one can't easily enforce them. I think property rights might only be useful with things that are practicably enforceable.

If I buy land from you, I can put a fence around it, post signs, patrol it, use it. That costs time and money, but if I employ the land for a high-level use, it's worthwhile.

If I find an unmanned continent, but don't have the capital to put it to good use, I won't be able to fence it ALL in. I won't try to patrol or protect all of it, since it wouldn't be worthwhile. Hence I can't enforce my property rights over a continent.

If I buy a bottle of air from you, I can similarly protect it from theft. If someone steals the bottle, I can sue him. What I can't do - if it's stolen, breathed in, then exhaled - I can't command others not to breathe it. I can't contract to sell it with the stipulation that it not be breathed by others not a party to the contract. The reason I can't is that it's not worthwhile. I'd have to bring billions of people to court, or impose huge precautionary costs on all breathers. I can only hold the signatories to a contract responsible.

If I sing a song, on private property, I can charge admission. But once the song gets recorded in someway, and "exhaled" onto the internet, I can't bring billions of people to court without improperly searching their computers and invading their privacy. I could probably sue whoever it was that violated an agreement with me - producing the initial bootleg - but the billion others are represented by your person C - and not subject to a contractual agreement.

If an advance in technology enables me to better-protect my "property" (with laser "electric eyes" or perhaps even radar), then perhaps I can enforce my property rights over a continent. But if an advance in technology enables others to disseminate my intellectual property to a billion people, I think it becomes useless to hold title to that information. A war on downloading would be just as affective as a war on drugs.

I think the principle of

I think the principle of attaching covenants to real property is applicable to this case. If the contractual reservation of copyright is attached to the work itself, the contractual obligation would be assumed by anyone who subsequently bought it.

Of course, such a purely contractual basis for intellectual property is a retreat from the Spooner/Galambos position that copyrights are a natural form of property; this latter is an assertion that just won't hold water.

And this excludes patents altogether, as a completely illegitimate monopoly on certain forms of technology.

John T. Kennedy is right in arguing that some forms of property are more convenient to enforce than others. Since the holder of a particular form of property should bear all the costs of enforcement, what this means in practice is that some forms of property will be so expensive to enforce that the benefits will justify the costs in a much smaller number of cases. The result, in a free market, will be an economy with forms of production that rely much less intensively on such forms of property rights. The State, by providing a system of copyright enforcement organized centrally and imposed from the top down, has artificially reduced the transaction costs of securing this form of "property," and thereby encouraged reliance on it beyond what a free market would support.

Suppose B signs a contract

Suppose B signs a contract to be A's slave for life. What damages can A claim if B breaches? Is he entitled to keep B a slave?

No, the property right to the self is inalienable. The contract is meaningless.

Johnathan, So if IP does

Johnathan,

So if IP does not exist can B correctly say that his contract not to distribute A's novel is meaningless since A has no more right to control distribution of the novel than he has to keep B as a slave?

Suppose A has written a

Suppose A has written a novel which he licenses people to read (but not copy or reveal) for $10 a pop. He is currently making $1000 a week licensing the novel. B breaks into A's house and steals two books - a copy of Hamlet and A's novel. Clearly B violated A's rights but my is the violation is the same for both books?

I think it's clear that B does A no further damage if makes and sells copies of Hamlet. But clearly the consequences to A may be far more significant if the novel he wrote and licenses becomes freely available. Does this mean B has greater liability if he copies and sells A's novel? I think most people understand that it does.

B imposes no cost on A by copying and selling A's Hamlet. Do opponents of IP really want to argue B imposes no more costs on A by copying and selling A's original novel?

One thing to keep in mind in

One thing to keep in mind in this discussion is the distinction between moral, deontological claims and consequentalist, pragmatic, or economic claims. It may be the case that IP is morally justified but pragmatically impossible, or it may be the case that IP is not morally justified but pragmatically possible, or any other combination of the two.

John writes,

Assume A rents B his car and B sells it to C. Has C violated A's property rights? Is it inconsistent with property rights to say that A's only claim is against B?

Now of course if C is conspiring explicitly or effectively with B to violate A's rights then he is liable.

This is where the circular argument comes in. In the case of a car, we already know (or at least most of us agree) that tangible property rights are justified. Because of this, we would hold C liable if he knowingly bought stolen property. But in the case of IP, if we do not first assume that IP is justified, and only assume that contract rights are justified, how can C be held liable for violating a contract to which he is not a party?

What are the damages? What harm is done to A if B shares something that is not A's property?

The damages would be stipulated in the contract, or determined by common law and precedent. As for harm, the complicated thing about IP rights is that the only harm involved is the possible lost revenue that the IP creator would have recieved if the recipient paid him instead of copied for free. But this isn't the same kind of harm we speak of in terms of tangible property - lost use value of the property.

Switching away from moral arguments to economic arguments for a moment, this nonrivalrous consumption aspect of intellectual property makes economic analysis somewhat complicated. The socially optimal price of a nonrivalrous good after it has been created is zero. In other words, society as a whole (measured by the combination of both producer and consumer surplus) is better off if no price is charged, because there is no cost to producing additional copies once an original exists. The "after it has been created" part is key, however, because it might not have been created in the first place if the creator did not have a financial incentive.

Suppose B signs a contract to be A's slave for life. What damages can A claim if B breaches? Is he entitled to keep B a slave?

I'm not sure what point you are trying to make, but contractual slavery discussions tend to complicate things even more. First, we would need to define the terms of the contract - what exactly do you mean by slavery? - and determine whether damages are specified in the contract, and whether or not it is coherent to say that someone can sell themselves into slavery.

Also, one thing these IP

Also, one thing these IP arguments demonstrate is the interconnectedness between moral claims and pragmatic claims. It is difficult to separate the two, especially when our concept of property in general is based on consequentialist justifications.

Kevin, Covenants are tricky

Kevin,

Covenants are tricky things. If I sell you an acre of land with the condition that it should never be sold to left-handed people, does it make sense that this condition should apply for all of eternity? Intuitively, I don't think it does, but perhaps I am wrong.

You do make a good point about the costs of enforcement, which lead to strange outcomes when these costs are borne by governments (i.e. taxpayers) rather than the property owners themselves. Andrew Chamberlain made a similar point recently with regard to ticket scalping.

John, B imposes no cost on A

John,

B imposes no cost on A by copying and selling A's Hamlet. Do opponents of IP really want to argue B imposes no more costs on A by copying and selling A's original novel?

It depends on how you define the term "costs". If we first assume that A is entitled to make a living as a novelist, then we would all agree that B has imposed a cost on A by robbing him of his livelihood. But what if we don't make that assumption? As David Friedman said, "I don't think anyone is entitled to earn a living doing what he likes to do--after all, you might like to do something that nobody else values having done."

Similarly, I'm sure we have all heard that Bush's tax policy imposes unfair "costs" on the poor and middle class, by shifting some of the tax burden away from the rich. But as libertarians are quick to point out, taking less away from the wealthy is not the same as "giving" them anything they didn't already have, just as taking away someone's social welfare benefit does not impose a "cost" on them unless we first assume that they were entitled to this benefit.

When we move from a world with enforeced IP rights to a world without them, it certainly seems like this is imposing a cost on IP owners. But only if we first assume that they were entitled to this right. If we do not, there is no cost.

"...after all, you might

"...after all, you might like to do something that nobody else values having done." - DF

But the fact that people were voluntarily paying $10 a pop in my example demonstrates that they value the novel.

Now you are arguing circularly, you say if there is no right there is no cost, and there is no right therfore no cost.

I just gave you an example of the cost B imposes on A. A was contracting freely in a way you say was legitimate. Now he's out $100 a week as a consequence of B's action. A owned both books that were stolen but copying and selling Hamlet does him no harm because he had no special right to the contents.

Do you agree that copying and selling the two books has different consequences for A? What is different about the two books?

"But in the case of IP, if

"But in the case of IP, if we do not first assume that IP is justified, and only assume that contract rights are justified, how can C be held liable for violating a contract to which he is not a party?"

You agreed B was liable for violating the contract. If C is conspiring with B to violate the contract then he is party to that violation and thus also liable.

The guy driving the getaway car for a bank robber the isn't stealing by driving a car, but he is conspiring to steal which makes him liable for the offense.

So if IP does not exist can

So if IP does not exist can B correctly say that his contract not to distribute A's novel is meaningless since A has no more right to control distribution of the novel than he has to keep B as a slave?

I'm not sure I understand the question. If IP does not exist, then any contract centered on IP is invalid. If IP does exist, then property titles have been exchanged between A & B (money and novel), and thus B is obligated to uphold his end of the deal.

But the fact that people

But the fact that people were voluntarily paying $10 a pop in my example demonstrates that they value the novel.

True, but it isn't enough to demonstrate that the novelist is entitled to payment.

Now you are arguing circularly, you say if there is no right there is no cost, and there is no right therfore no cost.

Not quite. I am not necessarily claiming that there is no right. I currently remain an IP skeptic (although I am leaning against IP). I am simply saying that unless a right is established, no cost exists, in the sense that you are using the term "cost."

A was contracting freely in a way you say was legitimate. Now he's out $100 a week as a consequence of B's action.

I agree, but that in itself does not demonstrate that B has imposed an unjust cost on A, unless we first assume that A was entitled to the revenue flowing from his IP right.

Consider the following addendum to your scenario. Let us suppose that in addition to licensing his own novel, A also licenses and sells copies of Hamlet for reading purposes only. A happens to be the only person to think of this ingenious business plan, even though we all agree that A does not have exclusive rights to Hamlet.

B comes along, steals a copy of both books from A, and starts makies copies of each. Now A is not only out the lost revenue associated with licensing and selling his own novel, but he also loses the revenue associated with licensing and selling Hamlet as well.

But since A never had exclusive rights to license and sell Hamlet, did B really impose an unjust cost?

For a more real world example, take the case of a firm that makes an economic profit (i.e. above and beyond normal profits) by selling a certain product. This economic profit attracts competitors to enter the market in order to get in on the action, thereby increasing quantity and decreasing price. The original firm is no longer able to enjoy economic profits. But do we say that these competitors imposed an unjust cost on the original firm?

If C is conspiring with B to

If C is conspiring with B to violate the contract then he is party to that violation and thus also liable.

Hmm. This is an interesting argument. I'll have to think about this one for a while.

If IP does not exist, then

If IP does not exist, then any contract centered on IP is invalid.

Jonathan, this seems a bit stronger than what I was originally claiming. I'm usually of the opinion that any two individuals can make almost any kind of contract they can agree to, as long as they violate no third-party rights in the process. But you maintain that certain contracts are invalid, such as selling oneself into slavery, because you believe that self-ownership is inalienable.

I'm not so sure this is true. Wouldn't this preclude suicide as well, because if I don't have the right to trade my life to others, why should I have the right to kill myself?

And in terms of IP, your claim would certainly counter the excellent question John T. Kennedy just raised about conspiracy. But I don't see why contracts involving IP would be necessarily invalid if IP in general was not a legitimate property right.

Jonathan, this seems a bit

Jonathan, this seems a bit stronger than what I was originally claiming. I'm usually of the opinion that any two individuals can make almost any kind of contract they can agree to, as long as they violate no third-party rights in the process. But you maintain that certain contracts are invalid, such as selling oneself into slavery, because you believe that self-ownership is inalienable.

I believe in the title-transfer theory of contract for the alienable right of property. So my view of contracts is much narrower than yours.

I'm not so sure this is true. Wouldn't this preclude suicide as well, because if I don't have the right to trade my life to others, why should I have the right to kill myself?

I don't think so. My view of natural rights is that they stem from free will; individuals use free will to pursue ends by employing means (property). A slavery contract is invalid because it violates free will if the slave wants to be free. On the other hand, suicide does not involve property exchange at all. Rather, it is the ultimate expression of free will.

And in terms of IP, your claim would certainly counter the excellent question John T. Kennedy just raised about conspiracy. But I don't see why contracts involving IP would be necessarily invalid if IP in general was not a legitimate property right.

Well, I thought what you were saying in your circularity claim is that contracts can only dictate the terms of already established property rights. If no such property rights are pre-existing, then the contract is meaningless. 'New' property rights cannot be created through contract.

Well, I thought what you

Well, I thought what you were saying in your circularity claim is that contracts can only dictate the terms of already established property rights. If no such property rights are pre-existing, then the contract is meaningless.

Maybe I should have said that instead!

But no - all I was claiming was that the contract can only get you as far as holding B liable, but it can't get you to hold C liable. Alas, though, John seems to have poked a big hole in my argument through the use of his "conspiracy" claim.

'New' property rights cannot be created through contract.

This was the original gist of my claim, but your interpretation of my argument is even stronger than my original intent!

Jonathan, to clarify my

Jonathan, to clarify my position with regard to the slavery contract I would not say that it is invalid, I would say that A is not entitled to compel B's performance. He can legitimately seek damages if B breaches the contract, at least what he paid B to enter into the contract.

We see this now in contract law. You can contract to have Michael Jordan pay basketball for your team but you can never force him to play basketball for you, contract or no. If you paid him $10 million up fron and he declines to play he probably owes you at least $10 million. The contract is valid but you cannot compel performance.

Like Jordan, the contract slave would be free to perform his contractual duties. Or not.

Of course, that's not really slavery is it?

Let me put it another way: A contract for slavery wouldn't be meaningless, but it also could not implement what is generally understood as slavery, since slavery is not a contract.

btw are Jonathan and

btw are Jonathan and Jonathan Wilde the same person?

Yes, they are (he is).

Yes, they are (he is).

John, Yes, Jonathan and

John,

Yes, Jonathan and Jonathan Wilde are the same person. I am not a lawyer, but I think you are right - contracts today do not oblige specific performance as a legally enforced obligation for breach of contract, only monetary restitution.

Well, it is true that

Well, it is true that contracts today do operate like that, but so what? I can certainly understand why a court would be unwilling to enforce a contract requiring specific performance as a penalty for violation. But why should the slave-owning party be prohibited from enforcing the contract himself through specific performance, so long as both parties agree to these terms in advance?

Take this real world example: two German men voluntarily agreed that one would kill and eat the other. Is this a legitimate interaction? If not, why not? If so, how does this differ from the case of a slave-owner trying to enforce his contract?

Hi Jonathan, Well, I thought

Hi Jonathan,

Well, I thought what you were saying in your circularity claim is that contracts can only dictate the terms of already established property rights. If no such property rights are pre-existing, then the contract is meaningless. 'New' property rights cannot be created through contract.

Is this your position? How does this fit in with our past (I think it was in connection with Iraqi mobile phone service, but I can't find it in a site search) discussion about bringing new property into trade? I thought that you had then stated a preference for having new forms of property homesteaded rather than defined through legislation and handed over to the market.

If there were no existing rights to the EM spectrum in a geographical area, and I were to stake a claim to a frequency where imported phones work and start building a network of antennas, do you maintain that I can't contract with cell phone users to charge them for use of that spectrum? This would make it awfully difficult to deal with any new forms of property. Do you think that we can only trade (because I'm not sure we could trade without some form of contract) 'fundamental' property, like perhaps real estate?

Mark, If there were no

Mark,

If there were no existing rights to the EM spectrum in a geographical area, and I were to stake a claim to a frequency where imported phones work and start building a network of antennas, do you maintain that I can't contract with cell phone users to charge them for use of that spectrum? This would make it awfully difficult to deal with any new forms of property. Do you think that we can only trade (because I'm not sure we could trade without some form of contract) 'fundamental' property, like perhaps real estate?

I'm not sure where I stand on IP rights, although I lean towards the anti position, mainly due to the nonrivalrous nature of IP. A portion of the EM spectrum, while not tangible, is still rivalrous, i.e, your use of certain frequency means I can't use that frequency. The same is not true for IP. A song can be used over and over again by as many people as desire. This is sort of like your example of oxygen that you used in the previous discussion on Iraq phones.

" But why should the

" But why should the slave-owning party be prohibited from enforcing the contract himself through specific performance, so long as both parties agree to these terms in advance?"

Because a person's right to himself is inalieanable and cannot be signed away. We could write up a contract that says you get to think with my brain, but you still don't get to think with my brain. I cannot trade you my sovereignty any more than I can trade you my rational faculty, and the latter is a moral consequence of the former.

"Take this real world example: two German men voluntarily agreed that one would kill and eat the other. Is this a legitimate interaction? If not, why not? If so, how does this differ from the case of a slave-owner trying to enforce his contract?"

The one to be eaten can go through with it voluntarily if he so chooses, but if he chooses to breach the other has no right to compel specific performance.

should read "the former is a

should read "the former is a moral consequence of the latter"

EM spectrum is not

EM spectrum is not rivalrous. EM waves do not interfere with each other, and any EM band could theoretically carry an infinite number of signals. The only reason EM waves appear to interfere with each other is that so much of our hardware is dumb. If the hardware doesn't know how to pick out only the signal meant for it, then all the other signals become "noise" from it's point of view.

Because a person's right to

Because a person's right to himself is inalieanable and cannot be signed away.

I've heard similar responses to the question of slavery, but I still have not found them convincing. Why is self-ownership so different than other forms of ownership?

[i]Virginia Warren: "EM

[i]Virginia Warren:

"EM waves do not interfere with each other, and any EM band could theoretically carry an infinite number of signals."[/i]

Not all at the same time and in the same place.

If C is conspiring with B to

If C is conspiring with B to violate the contract then he is party to that violation and thus also liable.
just wondering... Does this mean the government and the pharmeceutical companies actually owe the american people money?