Markets for Secrets?

Originally posted on Notes On Liberty

In a world without intellectual property, would it be possible to buy and sell secrets? I suggest the answer is yes. In this post, I provide both a theoretical framework for such markets, as well as pointing to real life examples of such markets already existing.

Introduction

In a previous post, we talked about why information is the only public good. But of course, it’s possible to keep information private. Such private information is called a secret. Currently, entrepreneurs and inventors have two choices when they have what they believe is a profitable secret: they can either keep recipe, industrial process, or so on, a secret, and be protected by “trade secret” laws; or they can “publicize” their secret in exchange for a patent (which they can use to either issue injunctions against competitors or to extract royalties).

But there has been a lot of economics literature in recent years that challenges the status of intellectual property (IP). Most famously, there is Michele Boldrin and David K. Levine’s book Against Intellectual Monopoly, where they detail both an empirical and theoretical case against the economics of intellectual property. Furthermore, patent lawyer Stephan Kinsella’s book Against Intellectual Property gives a principled legal and ethical case against IP.

Although these arguments have been gaining some steam, they are still a minority view. Critics often refer to profit motives for inventors. “Without IP, an inventor can never trust anyone they tell their invention to. Unscrupulous businessmen will take advantage of them, and reap all the profits without paying a dime to the person who originated the idea. This injustice will mean that no one will have any incentive to sharing their innovations, and so society will stagnate.” 

In a working paper titled Designing a Market for SecretsI explore this topic in detail. Here, I give the basic outline of how a market for secrets could work. I then follow up the theory with some real life examples that come close. Continue reading “Markets for Secrets?”

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