Academic journal article Harvard Journal of Law & Public Policy

Innovation and Inequality: The Separability Thesis

Academic journal article Harvard Journal of Law & Public Policy

Innovation and Inequality: The Separability Thesis

Article excerpt

The topic of this Essay concerns the interaction between innovation in areas of intellectual property on the one hand and the demand for greater equality of income and wealth in society on the other. Whatever one thinks of the latter objective, I think that it is a social mistake to link these two separate topics together. The correct approach is instead sequential. First, develop a set of rules that promotes the maximum level of innovation. Once that innovation question is settled, address inequality in income and wealth from a broader perspective-one that does not develop special rules to deal with intellectual property issues. I call this the "separability thesis."

In making this claim, I do not wish to insist that the problem of inequality, which for many people is the dominant social challenge of our time, does not matter. Instead I want to address the related question of whether inequality is addressed better by private or public means--to which my own answer is that decentralized private activity, buttressed by a charitable contribution deduction, will on balance work better than any modification of intellectual property rights. Hence I would argue that inequality matters but is better addressed separately from the question of innovation.

I think that the Essays of Professor John McGinnis (1) and Beth Kregor (2) strengthen the case for the separability thesis.

In his presentation, Professor McGinnis speaks about the huge power of intellectual property to speed up the leveling of wealth and opportunities across people in different social strata. His central point is that the rapid reduction in the costs of standard technologies--think smartphones and social media--increases the opportunities for personal advancement of those who are at the bottom of the income distribution. Lower prices give greater access to all, producing higher levels of overall social satisfaction, even if, as Adam Smith's invisible hand reminds us, that consequence was not part of the innovator's intention. (3) The innovator's own self-interest aligns with a desirable social objective. (4)

The more controversial portion of McGinnis's thesis is that the pace of innovation will insulate the new technological industries from the heavy hand of government innovation. In general, I think that his prognosis is overly optimistic, because resourceful and determined governments can always initiate anti-competitive regulations no matter what the present level of technology by focusing on its most vulnerable components. To give a simple example, companies like Uber and Airbnb do not just operate in an online environment. They have to deliver their rides and their accommodations in physical space, where they are vulnerable to regulations. Hence, it is possible for a single mid-level administrative official to attack the Uber business model that treats its drivers as independent contractors and not as employees--a status that is right now under serious legal challenge. (5) Airbnb must arrange for its customers to have rooms, which in turn could subject individual owners to various restrictions and hotel taxes, which Airbnb actually wants to collect itself in order to gain legal legitimacy. (6) And, of course, it must worry about serious issues such as zoning laws and landlord restrictions as it runs its business. (7)

It is not possible here to comment at length on the soundness of these various taxes and regulations. But that lack of specificity does not in my view undermine the essential argument for the separability thesis. Do not use regulation of specific firms or industries to secure redistributive ends. Indeed, it is critical to note that innovation can be socially valuable even if it does not result in higher levels of income equality. The argument runs as follows: Greater access is a byproduct of greater innovation, as are the benefits to those at the bottom of the income distribution. Yet by the same token, it is not clear that greater equality follows. …

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