Funding creativity and innovation (without patents or copyright)

How could new ideas receive economic support in a world without intellectual property laws?

Photo released by Minimal (
The LunaTik, a watchband engineered from space-age materials to house an iPod nano, was designed by Scott Wilson of Minimal, a firm that designs products for Nike, Motorola, and Samsung, among others. Wilson wanted to manufacture his design, so reached out to for initial funding. His appeal for $15,000 has so far netted almost $700,000.

The case against IP is not hard to make; patent and copyright (say) are artificial state-granted monopoly privileges that undercut and invade property rights. But the consequentialist and utilitarian mindset is so entrenched that even people who see the ethical problems with IP law sometimes demand that the IP opponent explain how innovation would be funded in an IP-free world. As I noted in The Creator-Endorsed Mark as an Alternative to Copyright:

I’m reminded of John Hasnas’s comments in his brilliant, classic article The Myth of the Rule of Law:”

What would a free market in legal services be like?

I am always tempted to give the honest and accurate response to this challenge, which is that to ask the question is to miss the point. … It is possible to describe what a free market in shoes would be like because we have one. But such a description is merely an observation of the current state of a functioning market, not a projection of how human beings would organize themselves to supply a currently non-marketed good. To demand that an advocate of free market law (or Socrates of Monosizea, for that matter) describe in advance how markets would supply legal services (or shoes) is to issue an impossible challenge.

With the advent of state IP legislation, the state has interrupted and preempted whatever other customs, business arrangements, contractual regimes and practices, and so on, that would no doubt have arisen in its absence. So it’s natural for those new to the anti-IP idea to be a bit nervous about replacing the current flawed IP system with … a vacuum. It’s natural for them to wonder, well what would occur in its absence? As I noted, the reason we are not sure is the state has snuffed them out. This is similar to the FCC which preempted and monopolized the field of property rights in airwaves just as they were starting to develop in the common law; now people are used to the idea of the state regulating and parceling out airwave or spectrum rights and might imagine there would be chaos if the FCC were abolished (for more on this see David Kelley & Roger Donway‘s 1985 monograph Laissez Parler: Freedom in the Electronic Media, as discussed in my post Why Airwaves (Electromagnetic Spectra) Are (Arguably) Property).

So, because people are bound to ask the inevitable: we IP opponents try to come up with some predictions and solutions and answers. Thus, in the end we must agree with Hasnas:

Although I am tempted to give this response, I never do. This is because, although true, it never persuades. Instead, it is usually interpreted as an appeal for blind faith in the free market, and the failure to provide a specific explanation as to how such a market would provide legal services is interpreted as proof that it cannot. Therefore, despite the self-defeating nature of the attempt, I usually do try to suggest how a free market in law might work.

So. How would content creators be rewarded in an IP-free market? I have tried to collect some answers in Innovations that Thrive without IP. I also came across some other ideas in TWiT 275 (81:45 to about 85:17). First they discuss the site Kickstarter, “a new way to fund creative ideas and ambitious endeavors…. Kickstarter is powered by a unique all-or-nothing funding method where projects must be fully-funded or no money changes hands.” As an example they discuss Scott Wilson’s use of the service to raise funds to sell watchbands for use with the new iPod nano (which has a clock interface). The set a goal of having $15,000 committed; as of the date of this post they have had almost $500k pledged. This guarantees enough funding and demand for the product to get off the ground.

They also discuss IndieGoGo, which allows projects to be funded. For example, people with low budget documentaries could post their project description to try to get funding. For example, one would-be documentarian wanted to do a film based on some collegiate a capella group; he needed to raise $1000 and raised twice that. The hosts also mention the site, which enables “social product development.” This lets you outsource various parts of engineering or manufacturing or product development to others, and give them a cut of profits. And then there is the micropledging service The Point, used recently by Austro-libertarians Bob Murphy (to challenge Paul Krugman to a debate–$56k pledged so far) and Vijay Boyapati to raise almost $20k for the Mises Institute–see Jeff Tucker’s The Age of Micro-Patronage).

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