Intellectual property and economy

Common types of intellectual property and its effect on the economy

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Intellectual property (IP) is a number of separate types of legal controls over innovations of the mind, both creative and commercial, and the related fields of law. Under intellectual property law, owners are given certain exclusive rights to a variety of insubstantial assets, such as musical, literary, and artistic works; findings and inventions; and words, phrases, symbols, and designs. Common types of intellectual property comprise copyrights, trademarks, patents, industrial design rights and trade secrets in some areas.

Although many of the legal principles governing intellectual property have developed over centuries, it was not until the 19th century that the term intellectual property began to be used, and not until the late 20th century that it became commonplace in the United States.

Financial incentive

These restricted rights allow owners of intellectual property to reap monopoly profits. These monopoly profits provide a financial incentive for the creation of intellectual property, and pay associated research and development costs. Some analysts, such as David Levine and Michele Boldrin, dispute this justification.

Economic growth

The legal monopoly granted by IP laws are credited with important contributions toward economic growth. Economists estimate that two-thirds of the value of large businesses in the U.S. can be traced to insubstantial assets. "IP-intensive industries" are estimated to produce 72 percent more value added per employee than "non-IP-intensive industries". A joint research project of the WIPO and the United Nations University measuring the effect of IP systems on six Asian countries found "a positive correlation between the strengthening of the IP system and subsequent economic growth."

However, connection does not necessarily mean causation: given that the patent holders can freely relocate, the Nash equilibrium predicts they will clearly favor operating in countries with strong IP laws. Neutrality disputed in some of the cases, the economic growth that comes with stronger IP system neutrality disputed is due to increase in stock capital from direct foreign investment.

Economics

Intellectual property rights are provisional state-enforced monopolies regarding use and expression of ideas and information.

Intellectual property rights are usually restricted to non-rival goods, that is, goods which can be used or enjoyed by many people concurrently —the use by one person does not exclude use by another. This is compared to rival goods, such as clothing, which may only be used by one person at a time. For example, any number of people may make use of a mathematical formula concurrently. Some pretests to the term intellectual property are based on the argument that property can only properly be applied to competitor goods (or that one cannot "own" property of this sort).

Since a non-rival good may be simultaneously used (copied, for example) by many people (produced with minimal marginal cost), controls over distribution and use of works are meant to give producers incentive to create further works.

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