Hidden Risks of Our Booming Free Market Governments Must Enforce the Law of Intellectual Property across Boundaries

By Coyle, Diane | The Independent (London, England), September 1, 1999 | Go to article overview
Save to active project

Hidden Risks of Our Booming Free Market Governments Must Enforce the Law of Intellectual Property across Boundaries


Coyle, Diane, The Independent (London, England)


THE FALL of the Berlin Wall nearly 10 years ago marked the definitive collapse of central planning as an economic system. Capitalism triumphed, wiping alternative models of political economy off the face of the globe. The US has been enjoying a more or less permanent boom since, riding the crest of a new economic wave of technological innovation and entrepreneurial freedom.

What an awesome irony it would be if the new economy turned out to be making free-market capitalism unsustainable. Yet that is the implication of a paper by two American academics studying the "new economy"*. They say laissez-faire markets will deliver increasingly undesirable results the more the economy depends on weightless knowledge goods such as software or music. What's more, in the age of the Internet, buyers might have too much information for their own good. To reach these counter- intuitive conclusions, they look at the hidden assumptions underlying Adam Smith's case for the superiority of the invisible hand of the free market. As Smith put it: "By pursuing his own interest {every individual} frequently promotes that of society more effectually than when he really intends to promote it."

The unintended efficiency of unco-ordinated decisions taken by countless self-interested individuals arises from the fact that prices send a dual signal. They ration demand and call forth supply. Any interference in the process leads to the wrong amount of consumption and the wrong amount of production.

Price signals do not work ideally in all conditions. Economists have long admitted in certain cases "externalities" mean there is a case for government intervention in the market. A classic example is a public good such as clean air. We all value it but any company that invests in emitting fewer pollutants will be giving a free ride to companies that do not. The free market will lead to little clean air.

The interesting characteristic of public goods, giving rise to the problem of free riders, is that unlike normal goods everybody can consume them at the same time. Many new goods or even pharmaceuticals are non-rival in the sense that the cost of supplying them to one extra consumer after the first is almost zero. For the greatest consumer satisfaction, they should be supplied free to everyone who wants one. But if the price is nil, no producer will have an incentive to create the goods in the first place.

A related problem to non- rivalry is non-excludability. It is hard to stop people who do not have to pay from using such goods. In a sense this is true of all goods because the might of the law is needed to protect private property. But although the legal framework exists to protect intellectual as well as physical property, it is much harder to stop music piracy than to prevent thieves walking off with physical goods.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Hidden Risks of Our Booming Free Market Governments Must Enforce the Law of Intellectual Property across Boundaries
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?