Wednesday, August 8, 2012

Today's patent wars show why businesses must be regulated

In the movie Master & Commander, Napoleanic wars warship captain Jack Aubrey famously said--during an argument with his ship's surgeon over treatment of the crew "Men must be commanded."

Under the circumstances he was right, and the same goes for businesses in any country.

Because absent proper regulation, the goal of every business being run under the principles Milton Friedman espoused--i.e., being run like Republicans say businesses should be run, with no goal other than profit--is monopoly.

Patents grant monopolies. That's the idea, of course, it's a valid one, equally of course. But patents for what? In the early 1900s every American car manufacturer paid royalties to the outfit that held the Selden Patents. Some guy named Selden had patented the car--you know, four wheels and a motor. Seriously. And everyone caved until Henry Ford challenged him, and lost, and didn't win until he took it to the Supreme Court.

Today patents are being granted frivolously. Apple has a patent on cell phones having rounded corners and a black background on the screen. Rounded corners? And Apple goes after other cellphone makers--notably Samsung and indirectly Google--in court for having those rounded corners. It's the Selden Patent wars all over again.

Because Apple wants a monopoly on smart phones, and is spending huge bucks, and forcing competitors to spend huge bucks, in court, which goes directly into the price of every smart phone out there.

No one should have a problem with Apple patenting its specific, unique smart phone bits and pieces. But not smart phones generically. That's illegitimate monopoly-seeking, which, when it wins, is promptly followed by replacing the free market with what economists call rent seeking--that is, charging citizens for something without providing the value that inheres in that something.

Rent seeking is what monopoly does when it has the consumer over a barrel. It's what regulation of the free market is intended to thwart, as the free market's players ruthlessly seek to turn their free market into a captive one.

Not that the patent office is being a bunch of slackers. Not only do the Republicans' policies produce these perversions of the free market, but their antigovernment jihad has produced a grossly understaffed patent office, which has been reduced to giving everything a patent and letting the patent holders duke it out in court.

In the military, men must be commanded. In the free market, businesses must be regulated IF you expect the free market to remain free.

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