Comment by esoltas | Hacker News Reader

Comment by esoltas | Hacker News Reader

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Soltas (the author) here. What I meant by "rents are not always bad" is that "rent" is a positive (i.e., value-free) concept, not a normative (moral) one. "Rent" in economics merely implies that the profits are in excess of a competitive-equilibrium outcome/allocation. In this case, the competitive outcome is perverse -- nobody innovates because, without IP, you pay for the cost of R&D but "copycats" can steal the idea without paying. (It's a prisoners' dilemma.) So profits from a patent are rent, insofar as they come from the protection per se. As I acknowledge, I think those rents are economically useful -- as an economist, I don't have anything interesting to say as to whether they are morally acceptable, as you discuss in your post. For example, it's a fair argument to say that "ideas should be free," and that the purpose of IP is not to enrich/honor/etc the innovator but merely to give him the incentive to contribute the idea to the social good. Or you might argue the opposite of that. I don't really have an opinion. Hopefully this clarifies the way economists use the word "rent."

>nobody innovates because, without IP, you pay for the cost of R&D but "copycats" can steal the idea without paying.

This just isn't true. It's human nature to innovate, just as it is human nature to sing, play music and dance.

There are many times when the IP system is not only absent, but actively working against the creator, yet it doesn't stop the process of innovation. It just slows it down.

The government also innovates and foots the bill for R&D, and there is a good case to be made that the most valuable technological innovations in our society do actually come from them.

>> nobody innovates because, without IP, you pay for the cost of R&D but "copycats" can steal the idea without paying. > > This just isn't true. It's human nature to innovate, just as it is human nature to sing, play music and dance.

Straw man fallacy.

The OP wasn't suggesting that literally nobody would innovate, just that innovation, particularly innovation paid for by private parties of the sort of thing which is expensive and easily copied, would significantly decline.

If you have ever paid to see someone sing, play music, or dance, you have participated in an activity which likely would not have occurred without there being a monetary incentive for that person to partake of the activity you paid to enjoy.

You're going way off on a tangent from the article. Some people innovate because it's their desire, that's irrelevant to the economic argument that patents encourage research departments.

That the current implementation of patents is highly flawed doesn't affect that basic fact.

>Some people innovate because it's their desire, that's irrelevant to the economic argument that patents encourage research departments.

It's highly relevant. If the patent system is being given credit for innovation taking place that would have taken place anyway, maybe it should be dismantled or at least heavily scaled back.

Let's say for the sake of argument that the patent system is 5% encouraging research and 95% stealing credit.

It doesn't matter to someone explaining that good rents exist. That the 5% exist at all allows a demonstration of the concept.

The article mentioned that the patent system overshoots, with a link to more info. That's all that's needed.

I think that the comment was confusing not because of a positive/normative distinction, but because many economists would use the word rent only to refer to inefficiency. While patents are ex post inefficient since they grant a monopoly, they are ex ante efficient (in theory) because they provide incentives to discover new things.

It seems like a real stretch to call a drug company that researches a completely new drug and patents it "rent seeking", even if they can be said to enjoy "monopoly rents" ex post.

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