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Property rights and externalities: the uneasy case of knowledge

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  • Giovanni Ramello

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Abstract

Drawing from Coase's methodological lesson, this article discusses the specific case of knowledge, which was for a long time chiefly governed by exchange mechanisms lying outside the market, and has only recently been brought into the market. Its recent, heavy "colonization" by the property paradigm has progressively elicited criticism from commentators who, for various reasons, believe that the market can play only a limited role in pursuing efficiency in the knowledge domain. The article agrees with the enounced thesis and tries to provide an explanation of it that relates to the fact that in specific circumstances property-rights can produce distinct market failures that affect the social cost and can consequently prevent attainment of social welfare. In particular, the arguments set forth here concern three distinct externalities that arise when enforcing a property rights system over knowledge. First, the existence of a property right may itself alter individual preferences and social norms, thus causing specific changes in individuals' behaviour. Second, the idiosyncratic nature of knowledge, as a collective and inherently indivisible entity, means that its full propertization can be expected to produce significant harm. Third, property rights can cause endogenous drifts in the market structure arising from the exclusive power granted to the right holder: though generally intended as a necessary mechanism for extracting a price from the consumer, in the knowledge domain property rights can become a device for extracting rents from the market.

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File URL: http://hdl.handle.net/10.1007/s10657-010-9198-3
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Bibliographic Info

Article provided by Springer in its journal European Journal of Law and Economics.

Volume (Year): 31 (2011)
Issue (Month): 1 (February)
Pages: 123-141

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Handle: RePEc:kap:ejlwec:v:31:y:2011:i:1:p:123-141

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Web page: http://www.springerlink.com/link.asp?id=100264

Related research

Keywords: Property rights; Intellectual property; Knowledge; Invention; Indivisibility; Externalities; Efficiency; D23; K11; O31; D62; O34;

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References

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  1. Heidi L. Williams, 2013. "Intellectual Property Rights and Innovation: Evidence from the Human Genome," Journal of Political Economy, University of Chicago Press, vol. 121(1), pages 1 - 27.
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  11. Allen, Robert C., 1983. "Collective invention," Journal of Economic Behavior & Organization, Elsevier, vol. 4(1), pages 1-24, March.
  12. Ramello, Giovanni B., 2007. "Access to vs. exclusion from knowledge: Intellectual property, efficiency and social justice," POLIS Working Papers 90, Institute of Public Policy and Public Choice - POLIS.
  13. Levmore, Saul, 2002. "Two Stories about the Evolution of Property Rights," The Journal of Legal Studies, University of Chicago Press, vol. 31(2), pages S421-51, June.
  14. Nuvolari, A., 2004. "Collective invention during the British Industrial Revolution: the case of the Cornish pumping engine," Working Papers 04.02, Eindhoven Center for Innovation Studies.
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Cited by:
  1. Cassone, Alberto & Ramello, Giovanni B., 2011. "The Simple Economics of Class Action: Private Provision of Club and Public Goods," IEL Working Papers 3, Institute of Public Policy and Public Choice - POLIS.
  2. Marchese, Carla & Marsiglio, Simone & Privileggi, Fabio & Ramello, Giovanni, 2014. "Endogenous Recombinant Growth through Market Production of Knowledge and Intellectual Property Rights," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201413, University of Turin.

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