Ep. 22: David K. Levine on Intellectual Monopoly, "Great Inventors" as Patent Trolls and the Lifecycle of Innovation

David K. Levine is an economist at the European University Institute and at Washington University in St. Louis. He is the author of Michele Boldrin of "Against Intellectual Monopoly", an empirical study of the economics of intellectual property (available for free here) that concludes that IP is not necessary for innovation and as a practical matter is damaging to growth, prosperity, and liberty.

IP law allegedly offers protection of innovation, most importantly in the form of patents and copyright. Most economists see IP protection as a "necessary evil". However, David believes they are in fact an unnecessary evil.

While IP laws do increase the reward for the innovator through a legally granted monopoly to produce and sell a unique product, they also have perverse effects such as making it costly and cumbersome to use other inventions, and they reward the inventor with better lawyers over the inventor with the better innovation.

So-called "patent trolls", for example, deliberately patent everything they can and sue other people to extract money. Surprisingly, many of the most famed inventors in history such as James Watts (steam engine) and the Wright Brothers (airplanes) turn out to be patent trolls. James Watts' predatory use of patent laws against his competitors had possibly delayed the Industrial Revolution by two decades.

David uses multiple examples from the music industry to the pharma industry to show that the alleged benefits of IP law are in fact empirically not demonstrated.

IP law is, therefore, a great example of a pernicious regulation that is holding back innovation not only in one but in many different industries across the board from media production, software, and financial markets all the way to pharma.

This episode offers deep insights into the history and mechanics of innovation. We learn about the so-called "lifecycle of innovation". Innovation typically starts with tinkerers and hobbyists, becomes a professional industry, and develops wide use of patents only late in its development to sustain the privilege of incumbents.

It shows that we need to develop a much better understanding of innovation as a process that requires permissionless tinkering.

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