Intellectual Property and Income Distribution

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Dongya Koh and others write,

We find that IPP capital entirely explains the observed decline of the US labor share, which otherwise is secularly constant over the past 65 years for structures and equipment capital.

IPP stands for intellectual property products. Nick Bunker discusses the paper. Pointer from Mark Thoma.

7 thoughts on “Intellectual Property and Income Distribution”

  2. It’s not hard, a la The Tabarrok curve, to create a model where as IPP goes up, welfare goes down.

    • Actually “up” is not really the right word. I’d say “dysfunctional” or “vigorous” or “capricious” or some other word instead. There may be no limit to the “strength” of IP if it is properly structured, but that isn’t what we have.

  3. There is no property in “intellectual property”, only gov’t enforced monopoly privilege to sell ideas.

    “Property” has the unique ownership characteristic that what you own is not owned by others, and for them to own it, you stop owning it. If I get your car (buy or steal), you no longer have it.

    Ideas are not like that — I can copy your idea and you still have it. The purpose of the monopoly is to provide a market-based incentive to the creators of good ideas. This has worked fairly well.

    For entertainment purposes, there is no longer any need for such gov’t force based incentives (music, movies, books, sports, plays, performances).

    • Late, I admit. BUT –
      “Property” is a relationship.
      Let us take Coca Cola. Think of all the ways that unpatented, uncopyrighted formulation has been delivered with constant reduction of continuous human efforts.

      There are forms of services that may be delivered in physical forms (books, music drinks, graphics, software . . .) whether “protected” or not can be supplied with continuous reductions on human efforts.

    • If there is no property in intellectual property because of government enforcement, then there is no property in property either. All property in the modern world is government regulation, and in tribal society, property is restricted to a few personal possessions – whatever an individual and their sympathisers felt were worth defending.

      There was a time when land fell into the category that you think ideas do. Property has increased in importance throughout history as organisational capacity has increased.

  4. The interesting point in Nick Bunker’s remarks is:

    Furthermore, the paper’s authors also looked into the elasticity of substitution between capital and labor, a key parameter for understanding the decline of the labor share. The three economists calculate an elasticity greater than one, meaning capital (including intellectual property products) is a substitute for labor. Several other studies that look at the question at a more macro level have also found an elasticity greater than one, while micro-level studies tend to find elasticities below one.

    Which is one reason why mass immigration to OECD countries is such a bad idea. Immigration boosters offering economic arguments assume a capital-labor substitution elasticity of less than 1, which isn’t true (something that has been obvious to empiricists for a while).

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