At UC Berkeley's Economics Department, I found a stack of free books on a chair. I grabbed a copy of my UCLA colleague Kal Raustiala's new book The Knockoff Economy. I want to offer some praise for the book and a few sharp questions.
First, let me praise Raustiala and Sprigman for being excellent writers and story tellers. The book is enjoyable to read. These guys are hip and versatile as they take us on a tour of fashion, comedians, cooking and football offensive sets. In each of these settings, capitalism offers us better products because of imitation and some degree of "intellectual theft". Now let's be careful here, no professor wants to celebrate plagiarism. Instead, in each of these settings a newcomer has taken an old idea and twisted it a little bit to create something new. An example being selling Korean Tacos from food trucks in Los Angeles. All professors know that they stand on the shoulders of giants so why shouldn't businesses?
The authors celebrate open source and give a fun example of Microsoft's costly attempt back in 1995 to write a great encyclopedia but in a classic David vs. Goliath fight that the open source Wikipedia crushed them.
Given that both of the authors are law professors, what are the implications for IP protection given the clear benefits of "easy access" to others' ideas? Here the professors appear to embrace a Goldilocks view. They respect the Boldrin and Levine arguments to abolish IP laws but they reject this view as "too radical". They mention this in an endnote on page 231. No reader of the book is likely to read that endnote. This book would be stronger if they devoted an entire chapter to this point. Given that the authors are lawyers, what are the best IP laws to have to stimulate innovation in the 21st century? Should developing nations have "knockoff" access without guilt? How do we design the "rules of the game" to encourage innovation? Do we currently have the best possible system? If not, what is the political economy that blocks adopting the "best rules"?
Given the benefits of having easy access to others' ideas, why not go "all the way"? If Boldrin and Levine are wrong, why are they wrong? The book could explore more the dynamics of investment. When a fashion designer invests in a new dress, how much time and resources does it take to design it? What is the designer's expected rate of return on this investment? If new drugs had no IP protection what would be the rate of innovation in this industry?
Implicit in arguing that "knockoffs" benefit society is an idea of strategic complementarities --- that knockoffs encourage creating new permutations and seeing if they are popular with the public. I agree with this vision but I wonder if there are cases when it does not hold. I think of Weird Al and his parodies of celebrity videos such as "Eat It". Did Michael Jackson have the IP in this case or would denying Weird Al the ability to do his thing make society worse off?
I do recommend this book. It highlights how lawyers and economists can talk to each other about the important question of free market progress and the economics of the production of new goods.
