Edited by David Rooney, Greg Hearn and Abraham Ninan
Chapter 11: Intellectual Property Rights in the Knowledge Economy
Peter Drahos 1. Introduction In any economist’s account of what makes a successful economy the institution of private property is never too far away and usually central. Douglass North, in answering his question ‘why aren’t all the countries in the world rich?’ (1974, p. 15), concludes that countries create well-defined property rights that stimulate individuals into productive activity by raising the level of private return to meet the social return. Theories of economic development that advance an institutional explanation of development include widely distributed and enforceable property rights as a key feature of institutions that promote development (Acemoglu 2003). Does the general case that can be made out for the economic benefits of private property apply to intellectual property rights (IPRs)? This is not an easy question to answer. Economic theory suggests that a society that had no intellectual property protection at all would almost certainly not be allocating resources to invention and creation at an optimal level (Landes and Posner 2003). But equally a society that went to extremes of protection would almost certainly incur costs that exceeded the benefits. Figure 11.1 captures the idea that one can have too much intellectual property protection. In short, there is no easy jump from the general economic theory of property rights to IPRs. IPRs, like general property, give their holders a bundle of rights, most importantly the rights of exclusion, transfer and licensing. Like general property rights they facilitate bargaining and investment activity. But there are also important differences between...
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