In 1945, Fredrick Hayek described the problem of economic development as "a problem of the utilization of knowledge not given to anyone in its totality." Hayek's insight has unexpected relevance for what has emerged as the central question in modern intellectual property and related fields: When might the assignment of property rights have anti-competitive consequences? The traditional, yet central, economic answer to this question emphasizes a tradeoff between incentives created by property grants and resulting higher prices and deadweight losses. Under this model intellectual property grants are desirable to the extent that they encourage new product development at a reasonable cost.
Both the above quotation from Hayek and a growing body of scholarship suggest that this is the wrong way to assess the problem. This scholarship suggests that the most important economic effects of intellectual property may not be effects on price, but rather on industry structure. According to this view, we must weigh the benefits of intellectual property assignments, which include subsidizing or making possible desirable economic activity, against the costs of the centralization of economic decisionmaking and the creation of barriers to innovation and market entry.
This Essay discusses a crucial aspect of this problem: the effect of rights assignments on the decision architectures of affected industries. Industry decisionmaking is not a topic of mere abstract interest. It is central to the economic performance of firms, industries, and entire nations. Professors Joseph Stiglitz and Raaj Sah have argued that different systems of product development may account for the variation in performances of planned and market economies. Hayek similarly focused on decentralized versus centralized use of information as central to a "rational economic order." To the extent that intellectual property assignments affect product development decisionmaking, and to the extent such assignments cover more and more industries, their effects may be fundamental to the performance of the economies of the future.
Intellectual Property Law | Law
Intellectual Property, Innovation, and Decentralized Decisions,
Va. L. Rev.
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/842