[OPE-L:7669] Re: Re: Value of information

From: Paul Bullock (paulbullock@ebms-ltd.co.uk)
Date: Sun Sep 15 2002 - 16:57:13 EDT

Dear michael,

canyou confirm your email  as given here, i tried direct but couldnt get


paul bullock

----- Original Message -----
From: "michael perelman" <michael@ecst.csuchico.edu>
To: <ope-l@galaxy.csuchico.edu>
Sent: Thursday, September 05, 2002 4:41 AM
Subject: [OPE-L:7598] Re: Value of information

> This is a very primitive version of a paper I am preparing for the URPE
> sessions in Washington.  Any comments would be appreciated.
> Intellectual Property Rights and the Commodity Form: New Dimensions in
> the Legislated Transfer of Surplus Value
>  Introductory
> Karl Marx analyzed how markets first create surplus value and then
> transfer some of this surplus value from capitalists to rentiers,
> landlords, and other capitalists.  Intellectual property rights are
> rapidly expanding the scope of the commodity form, often converting the
> products of what Marx called universal labor into an entirely new type
> of commodity.  This new commodity form radically deepens the
> contradictions of the capitalist system.
>   I am now going to restrict my discussion here to intellectual property
> in science and technology.  Markets for goods with high intellectual
> property content are unlike typical commodity markets.  The owners of
> existing intellectual property provide no material good or even a
> service, yet can nonetheless demand payments for use of their
> "products."  Since intellectual property is a monopoly, owners of
> intellectual property do not feel the direct force of competition, only
> cross product competition.  In addition, the cost of production is more
> or less irrelevant in markets for intellectual property, since
> reproduction costs are trivial compared to market prices.
>   Payments to owners of intellectual property are more like the
> extraction of rent than the payment for a commodity.  But unlike land,
> intellectual property rights supposedly represent a reward for a
> creative achievement.
>   As I will discuss later, in almost every case, the creation of
> intellectual property represents a social effort in which scientists or
> artists draw upon the work of their predecessors.  As a result, rival
> claimants to intellectual property rights abound.  More often than not,
> they will launch expensive litigation in hopes of obtaining exclusive
> ownership for themselves, or at least a valuable monetary concession.
>   Within the eyes of the law, intellectual property rights are akin to
> the ownership of capital goods, except that this ownership expires after
> a set period of time.  Intellectual property, however, differs from real
> capital goods in an important respect.  In the case of a typical
> commodity, payments flow to the various agents who control the elements
> of the social labor process that originally contributed to the
> production of the capital good, despite the fact that some of the
> surplus value will provide rewards for non?producers in the form of
> profits, interest, and rents.
>   In the case of the conversion of scientific or technical knowledge
> into intellectual property, modern capitalism reverts to a
> winner?take?all arrangement in which the law assigns ownership to a
> single agent, while offering absolutely nothing to the others who have
> contributed to its creation.  Nonetheless, even more so than in the case
> of the production of capital goods, scientific and technical knowledge
> depends upon a social labor process.
>   No one person makes a scientific discovery.  Instead, science and
> technology depend upon a complex network of information flows,
> reinforced by a publicly supported educational system.  Yet the first to
> make a claim with the patent system is supposed to deserve the exclusive
> right to the discovery.
>  Intellectual Property as a Public Good
> Writing in the Theories of Surplus Value, before he had worked out his
> fully worked out his distinction between price and value, Marx observed:
>   The product of mental labour ?? science ?? always stands far below its
> value, because the labour?time needed to reproduce it has no relation at
> all to the labour?time required for its original production.  For
> example, a schoolboy can learn the binomial theorem in an hour.  [Marx
> 1963?1971, i, p. 353]
> So, unlike land or most commodities that command rents, intellectual
> property is non?rivalrous.  As Marx observed, "Once discovered, the law
> of the deflection of a magnetic needle in the field of an electric
> current, or the law of the magnetization of iron by electricity, cost
> absolutely nothing" (Marx 1977, p. 508).  In fact, science and
> information may be called meta?public goods, in the sense that they
> become more valuable the more that people use them.
>   Writing well before the hyperbole of the New Economy became
> commonplace, Marx sensed that the growing importance of science
> represented a serious contradiction to the law of value.  In a
> remarkable section of the Grundrisse, he observed:
>   To the degree that labour?time ?? the mere quantity of labour ?? is
> posited by capital as the sole determinant element, to that degree does
> direct labour and its quantity disappear as the determinant principle of
> production ?? of the creation of use?values ?? and is reduced both
> quantitatively, to a smaller proportion, and qualitatively, as an, of
> course, indispensable but subordinate moment, compared to the general
> scientific labour, technological application of natural sciences, on one
> side, and to the general productive force arising from social
> combination in total production on the other side ?? a combination which
> appears as a natural fruit of social labour (although it is a historical
> product).  Capitalism thus works towards its own dissolution as the
> force dominating production.  [Marx 1973, pp. 700]
> Here Marx was not looking at the overthrow of capitalism by dissatisfied
> workers, but rather by its technological irrelevance.  He continued:
>   The theft of alien labour time, on which the present wealth is based,
> appears a miserable foundation in face of this new one, created by
> large?scale industry itself.  As soon as labour in the direct form has
> ceased to be the great well?spring of wealth, labour time ceases and
> must cease to be its measure, and hence exchange value [must cease to be
> the measure] of use value ....  The free development of individualities,
> and hence not the reduction of necessary labour time so as to posit
> surplus labour, but rather the general reduction of the necessary labour
> of society to a minimum, which then corresponds to the artistic,
> scientific etc. development of the individuals in the time set free, and
> with the means created, for all of them.  Capital itself is the moving
> contradiction, [in] that it presses to reduce labour time to a minimum,
> while it posits labour time, on the other side, as sole measure and
> source of wealth.  [Marx 1973, pp. 705?6]
> Within this environment, capitalists can no longer pretend that they are
> serving a social function fostering accumulation by driving workers
> longer or harder or even by organizing them efficiently.  Instead, Marx
> realized that this new stage:
>   calls to life all the powers of science and of nature, as of social
> combination and of social intercourse, in order to make the creation of
> wealth independent (relatively) of the labour time employed on it.
> [Marx 1973, pp. 706]
> In other words, value theory, which is merely an analysis of how
> capitalism works, may have some relevance in a primitive stage where the
> "worker [is reduced to] nothing more than personified labour?time [and
> where all] individual distinctions are obliterated" (Marx 1977, p.
> 353).  In contrast, at the stage where universal labor becomes dominant,
> the "material conditions [of production] blow this foundation [based on
> the minimization of labor time] sky?high" (Marx 1973, p. 706).
>  Another Dimension of Universality
> Universal labor has another important characteristic.  In addition to
> spreading costlessly throughout society, it often works in strange
> ways.  A scientific idea can cascade for decades and decades inspiring
> one technology after another.  Econometric estimates suggest that the
> typical technological discovery requires about 20 years before it
> reaches fruition.  More basic scientific research, which lies behind the
> technology, takes even longer before it begins to affect our daily
> lives.  In this spirit, Lewis Mumford once proposed:  "It was Henry who
> in essentials invented the telegraph, not Morse; it was Faraday who
> invented the dynamo, not Siemens; it was Oersted who invented the radio
> telegraph, not Marconi and De Forest.  The translation of the scientific
> knowledge into practical instruments was a mere incident in the process
> of invention" (Mumford 1963, pp. 217?8).
>   Typically, the new technologies do not develop from a single
> scientific idea; instead they depend upon the confluence of the number
> of scientific discoveries, each of which had been further developed by
> number of other people.  By the time the technology is mature enough to
> pay propose to the patent office absolutely nobody could determine the
> relative contributions of the various people involved.
>  Intellectual Property and the Falling Rate of Profit
> Of course, Marx never suggested that the rise of universal labor would
> be an exclusive cause for transcending the capitalist mode of
> production, but it certainly does call for a sharp break with the
> traditional vision of a market?based system of competitive commodity
> production.
>   Rather than directly threatening the capitalist of production,
> universal labor has become a major prop for the system in the form of
> intellectual property rights.  In fact, the protection of intellectual
> property has become a substantial counterweight to the tendency for the
> rate of profit to fall.
>   The relationship between intellectual property rights and the rate of
> profit is not new.  During the late nineteenth century laissez?faire
> economists strongly opposed the strengthening of intellectual property
> rights as a monopolistic intrusion into sacred grounds of free markets.
> Only after the economy slipped into crisis mode in the last decades of
> the century did most economists relent, seeing intellectual property
> rights as a way to avoid the economic catastrophe they saw unfolding.
> Some principled laissez?faire economists, such as Hayek and Mises,
> continued their resistance even into the twentieth century, but they
> were a distinct minority.
>   Not surprisingly, the next surge in strengthening intellectual
> property rights in the United States began in the latter part of the
> 1960s, as stagflation began to engulf the economy and earlier trade
> surplus turned negative.  Although many old line industries could not
> compete effectively in world markets, exports of intellectual property
> in the form of royalties and copyright fees soared.
>   I have not seen hard data regarding the effect of intellectual
> property rights on the rate of profit, but I am convinced that it is
> substantial. Just think about Microsoft and pharmaceutical and industry
> with their low marginal costs relative to their market prices.
>  The Contradictions of Intellectual Property
> The general thrust of Marx's scattered comments on universal labor is
> clear:  the "natural" course of market development would be the
> promotion of universal labor and the obsolescence of markets.  Markets,
> however, are anything but natural.  They came into being by the good
> graces of primitive accumulation.  Once begun, they still require the
> constant nurturing of state power.
>   In the case of managing universal labor, the state performs two vital
> functions to prop up the market.  In the first place, the state directly
> subsidizes a good deal of universal labor.  This arrangement is, in
> itself, perfectly understandable.  As neoclassical economists have long
> known, individual enterprises have little incentive to employ universal
> labor because they have difficulty in appropriating its fruits in a
> commodity form.  The capitalist state, however, typically refuses to
> make the results of universal labor available to all.  Instead, it
> converts the universal labor into private property, even if the work was
> originally done in the public sector.
>   Over and above subsidizing universal labor and making it private
> property, the state uses its coercive powers to enforce these
> intellectual property rights.  Since the misappropriation of
> intellectual property is less obvious than the theft of physical goods,
> the protection of intellectual property rights is necessarily far more
> intrusive than comparable efforts to protect physical goods.  Within
> this environment, owners of intellectual property rights often even
> demand that providers of commodities modify their products in ways that
> actually diminish their usefulness.
>   The privatization of universal labor, like all other attempts to
> correct crises, creates further contradictions ?? in this case, it
> erects a serious barrier to further scientific and technological
> progress.  Let me just enumerate a few of the detrimental effects.
> First of all, every agent, whether an individual researcher or a major
> corporation, has a strong incentive to maintain the utmost secrecy ??
> thereby stifling the communication, which is the very lifeblood of
> science.  In addition, incredible efforts are wasted in attempting to
> get around existing intellectual property by techniques such as reverse
> engineering.
>   Because intellectual property law awards a single individual credit
> for the complex social process it encourages patent races, which
> dissipate considerable scientific effort.  In addition, the emphasis on
> intellectual property means that many scientists end up devoting
> considerable time and energy learning about the legal ramifications of
> their work ?? efforts that would be better spent in doing science.
>   Excessive litigation represents a more obvious dissipation of
> potentially productive energies.  Corporations attempt to extend the
> boundaries of their intellectual property rights in much the way
> imperialist nations wage war in order to increase their territory.
> Corporations work frantically to amass patents.  Many of these patents
> have no utility whatsoever except to counterattack those who might
> challenge their right to use some technique.
>   The main battlefield is the legal system.  Patent suits typically cost
> millions of dollars.  Corporations also expend considerable energy to
> win favorable legislation.  Public relations become a useful adjunct in
> this effort.  These supplemental efforts are also costly.
>   The monopoly rights associated with intellectual property raise
> prices, transferring immense quantities of income and wealth to the few
> corporations that hold the mass of intellectual property rights.  By
> holding millions of people in unnecessary poverty, this system thwarts
> their potential contributions to the pool of universal labor.  In
> addition, the quest for intellectual property rights has had monstrous
> effects on higher education.
>   Finally, intellectual property rights undermine the very nature of
> free scientific inquiry.  The truly great scientific discoveries result
> from scientists following their own interests rather than the narrow,
> quick?profit?oriented priorities of giant corporations.
>   In my book, Steal This Idea: Intellectual Property Rights and the
> Corporate Confiscation of Creativity, I have tried to document in more
> detail the enormous costs that intellectual property rights have imposed
> on society.
>   Instead, the economic progress depends upon people having the
> opportunity to develop their skills freely and to cooperate with one
> another.  Harsh corporate discipline creates a barrier to progress.
>  Add
> In short, universal labor defies the sort of commodification envisioned
> in economic textbooks.  At the same time, the commodification is a
> necessary measure to counteract the falling rate of profit.  This
> strategy of defending the capitalist form seriously undermines the
> social and economic potential of scientific labor creating a deeper
> contradiction.
>  References
> Marx, Karl. 1963?1971. Theories of Surplus Value, 3 Parts (Moscow:
> Progress Publishers).
> ___. 1973. Grundrisse (NY: Vintage, 1973).
> ___. 1977. Capital, Vol. 1 (New York: Vintage).
> Mumford, Lewis. 1963. Technics and Civilization (NY: Harcourt, Brace and
> World).
> Perelman, Michael. 2002. Steal this Idea: Intellectual Property Rights
> and the Corporate Confiscation of Creativity (NY: Palgrave).
> --
> Michael Perelman
> Economics Department
> California State University
> Chico, CA 95929
> Tel. 530-898-5321
> E-Mail michael@ecst.csuchico.edu

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