Over the past few days, I finally came around reading Michele Boldrin and David Levine's Against Intellectual Monopoly. I had read bits and pieces from the on-line version (still available) and followed their blog (see my blogroll in the sidebar), but reading it from cover to cover makes their case more convincing.
Essentially, the book challenges the conventional view that temporary monopolies like patents and copyrights are necessary for innovation. This is the mantra you hear everywhere: if there weren't patents on drugs, the pharmaceutical companies would never be able to recoup their investment in research, their stratospheric returns on investment notwithstanding. Or that without copyright, artists cannot make a living.
Boldrin and Levine show plenty of examples that demonstrate that it is possible to make an absolutely decent living without monopoly protection. For example, the early US book industry did not have copyright protection, yet publishers and authors were make more profits than in Britain, where protection pushed prices up and print runs down. US printers, however, flooded the market with cheap books and thus contributed to the increase in literacy.
This brings me to the fact that monopoly is rarely good for social welfare. The book goes through numerous instances where patents actually inhibit progress by preventing innovations based on a current patent. Also, they have been many example where an industry expanded greatly while it was free from patents, but once some big players started feeling threatened by new innovators, they pushed Congress to extend the coverage of patent laws, and innovation and expansion comes to a standstill.
This is a great book. I bought a copy, but you did not need to, as it is not copyrighted and available for free download. But I guess I contributed to demonstrate that you can make a buck without copyright, and the authors deserve to be rewarded.