Wednesday, August 27, 2014

Songs Are Like Factories (a deeper look)

Introduction


In several places, I have have presented a comparison between the physical object (a bicycle) and the intangible (a song).  A song is like a bicycle (the consumer good) AND a bicycle factory (the producer good). Unauthorized copying is trespass, because it is like sneaking into the factory and running the assembly line.

Stephen Davis argues that the analogy is flawed:

You state (correctly) that Betty's trespass is wrong because "the owner of property is entitled to exclude others from using it, even when not using it himself."

You state (incorrectly) that I'm assuming rivalry must be physical. Here is my argument (not assumption) as to why Betty interfered with John's use of his factory: "at the very same time that he was using it in the way he wanted (vacant, machinery off, lights out, etc.), she used it for her own purposes (occupied, machinery on, lights on, etc.)."

Notice the key point: the factory can't be in both states at the same time. Its use by one person necessarily excludes use by another. This is the entire reason that property rights are necessary.

You say that, if I copy your song, I'm interfering with your use. But you are still completely free to do whatever you want with your song, at any time. This is not the case in the factory example.

Thus, your argument fails. 

-Stephen Davis

Davis is simply applying a different standard to physical vs. intangible objects. I will re-state Davis' argument, applying a consistent standard.

Argument for Physical Property


Suppose I build a factory, and inside I build 100 identical machines. I own the building, I own all 100 machines.

Machine #1 is plugged in and turned on. The rest of the machines (#2-100) are unplugged.  I am using Machine #1 to produce 48 widgets / day.  I own each widget produced. I advertise, and sell widgets on the market.

You are one of my customers. You like my widgets, and so do your friends. You like them so much you decide to manufacture a whole bunch and pass them out among your friends. Unfortunately, you do not hold title to my factory, and thus lack any legal access the machines necessary to manufacture widgets. If you are to succeed, you must resort to illegal means.

You sneak into my factory without permission, plug in machine #97, turn it on, and make a few widgets. I catch you red-handed. Naturally, I draw my weapon and line you up in my sights, prepared to use rightful deadly force in defense of my property.

You attempt to argue your way out by claiming that you rightfully own the widgets you made, because you didn't interfere with my making widgets.

I cock my weapon, while explaining the fallacy in your position:

Machine number #97 can either be on or off. Just because it is off doesn't mean I am not using it. It just means I prefer that it be off right now. Since it cannot be both on and off at the same time, your turning it on interferes with my use.

We may extend this reasoning to include the entire factory. Each of the 100 machines can either be on or off. Thus there are 10,000 different combinations of "on" and "off" for the array of machines (10,000 different "states"). Although the state can be changed (by turning machines on or off), at any one point in time, the factory must be in one particular state, to the exclusion of all other possible states.

As factory owner, I have the right to decide which of the 10,000 possible states I prefer. If your action (turning on or off a machine) causes a different state than I desire, then you have interfered with my use, because it is not possible for my preferred state to exist at the same time as your preferred state.

You argue that I was making 48 widgets / day before your action, and I am still able to make 48 / widgets / day after your action. You wonder how you could possibly be interfering with my use. I shift the aim of my weapon, and continue to explain:

The numbers chosen (48 widgets / day, 100 machines, 10,000 combinations) are completely arbitrary. The principle would hold true if it was 26 widgets / day, and 59 machines, and 3481 combinations. As the guy who built all this machinery,  I own 100% of all possible use, and that includes owning 100%  of all the widgets you made.

You begin to tremble. You say you should own the widgets you made, because you used your own labor.

That's true but completely irrelevant. You had no right to bring your "labor" anywhere near my machines. I step closer, focusing you in my sights.

Your eyes widen considerably. Smiling from ear to ear, you next claim that you gained ownership of Machine #97 YOURSELF, because you plugged it in. After all, a machine that is not plugged in is completely useless. You even say that YOU'VE done ME a GREAT FAVOR by increasing the overall productive capacity of MY OWN FACTORY factory. Think of how many more widgets can be made now, because Machine #97 is operating.

That's true but irrelevant. You had no right to do anything with my machines. Do you really believe that you gain ownership of a machine's productive capacity, simply because you did a tiny amount of labor in plugging the machine in? The person who built the machine owns it, not the person who plugs it in. How preposterous! At this point I seriously wonder if you are in any way reasonable.

Increasingly desperate, you suggest that I surrendered ownership of my entire factory because I published my address on my website, and because I advertise. This is so ridiculous, I cannot respond. Instead, I demand back the widgets that you made on my machine.

You inform me that you "gave the widgets away to your friends". You also told your friends that they should come here, "plug some more machines in", and "make more widgets" to give away to their friends. And if that pesky factory owner shows up, just use the above arguments.

In fact, tell him that this is now the PEOPLE"S FACTORY! As many machines as possible must be plugged in and operated, and all widgets produced must be given away to the people. Widgets are no longer a manufactured consumer item. Widgets are now a basic right, a matter of entitlement.  

This is where I begin to lose my patience. My finger finds its way to the trigger, final aim is taken.

"Get the hell off my property, and don't come back", I say.

"You're trying to impose a negative servitude on me", you say.

Conclusion to Physical Property

The point made by the allegory above should be obvious by now. The factory owner and a trespasser are disputing the use of physical machines. The trespasser offers increasingly absurd rationale in trying to legitimize his unauthorized use of the factory owner's property. The final destination of this philosophical approach is, and must always be, pure communism.

Introduction to Intellectual Property


The allegory above takes place in physical space. Now let us repeat the exercise in intellectual space.
We will substitute an intellectual factory in place of the physical factory; an intellectual machine for each physical machine, and an intellectual widget for each physical widget. Other than that, we will present the identical allegory.

Writing, recording, selling and distributing a song is just like building a widget factory, selling and distributing widgets. The crucial thing to remember is that a digital song file can function as both the consumer good (the widget) or as the producer good (a widget-making machine). If you want to understand what is really going on, it is essential that you keep these two functions separate in your mind.

A song is a widget. You get the widget in your ear, and for some reason, you like it. I write songs. I am in the business of designing and manufacturing widgets, in the hopes that you and others will like them enough to buy them. I write and record a song. This is like building a factory with widget-making machines inside.


Argument for Intellectual Property


Suppose I write a song. A digital song file is like a factory, because you can use it to mass-produce copies of the consumer good.  So in creating the song, it is as if I built the factory, and inside it I built 100 identical machines. I own the building, I own all 100 machines.

I realize that the potential reproductive capacity of my song is vast. However, making new copies entails the expenditure of further resources on my part. I make a decision to begin making a small number of copies at first, which is like plugging in just one machine in my factory, out of the many I could potentially use at some future time.

Machine #1 is plugged in and turned on. The rest of the machines (#2-100) are unplugged.  I am using Machine #1 to produce 48 song-copies / day.  I own each song-copy produced. I advertise, and sell song-copies on the market.

You are one of my customers. You like my song-copies, and so do your friends. You like them so much you decide to manufacture a whole bunch and pass them out among your friends. Unfortunately, you do not hold title to my song, and thus lack any legal access the machines necessary to manufacture song-copies. If you are to succeed, you must resort to illegal means.

When you make a song-copy without permission, it is like sneaking into my factory without permission, plugging in machine #97, turning it on, and making a few widgets. I catch you red-handed. Naturally, I draw my weapon and line you up in my sights, prepared to use rightful deadly force in defense of my property.

You attempt to argue your way out by claiming that you rightfully own the song-copies you made, because you didn't interfere with my making song-copies.

I cock my weapon, while explaining the fallacy in your position:

Machine number #97 can either be on or off. Just because it is off doesn't mean I am not using it. It just means I prefer that it be off right now. Since it cannot be both on and off at the same time, your turning it on interferes with my use.

We may extend this reasoning to include the entire factory. Each of the 100 machines can either be on or off. Thus there are 10,000 different combinations of "on" and "off" for the array of machines (10,000 different "states"). Although the state can be changed (by turning machines on or off), at any one point in time, the factory must be in one particular state, to the exclusion of all other possible states.

As factory owner, I have the right to decide which of the 10,000 possible states I prefer. If your action (turning on or off a machine) causes a different state than I desire, then you have interfered with my use, because it is not possible for my preferred state to exist at the same time as your preferred state.

You argue that I was making 48 song-copies / day before your action, and I am still able to make 48 song-copies / day after your action. You wonder how you could possibly be interfering with my use. I shift the aim of my weapon, and continue to explain:

The numbers chosen (48 song-copies / day, 100 machines, 10,000 combinations) are completely arbitrary. The principle would hold true if it was 26 song-copies / day, and 59 machines, and 3481 combinations. As the guy who built all this machinery,  I own 100% of all possible use, and that includes owning 100%  of all the song-copies you made.

You begin to tremble. You say you should own the song-copies you made, because you used your own labor.

That's true but completely irrelevant. You had no right to bring your "labor" anywhere near my machines. I step closer, focusing you in my sights.

Your eyes widen considerably. Smiling from ear to ear, you next claim that you gained ownership of Machine #97 YOURSELF, because you plugged it in. After all, a machine that is not plugged in is completely useless. You even say that YOU'VE done ME a GREAT FAVOR by increasing the overall productive capacity of MY OWN FACTORY. Think of how many more song-copies can be made now, you vomit, because Machine #97 is operating.

That's true but irrelevant. You had no right to do anything with my machines. Do you really believe that you gain ownership of a machine's productive capacity, simply because you did a tiny amount of labor in plugging the machine in? The person who built the machine owns it, not the person who plugs it in. How preposterous! At this point I seriously wonder if you are in any way reasonable.

Increasingly desperate, you suggest that I surrendered ownership of my entire song because I published my address on my website, and because I advertise. This is so ridiculous, I cannot respond. Instead, I demand back the song-copies that you made on my machine.

You inform me that you "gave the song-copies away to your friends". You also told your friends that they should come here, "plug some more machines in", and "make more song-copies" to give away to their friends. And if that pesky factory owner shows up, just use the above arguments.

In fact, tell him that this is now the PEOPLE"S SONG! As many machines as possible must be plugged in and operated, and all song-copies produced must be given away to the people. Song-copies are no longer a manufactured consumer item. Song-copies are now a basic right, a matter of entitlement.  

This is where I begin to lose my patience. My finger finds its way to the trigger, final aim is taken.

"Get the hell off my property, and don't come back", I say.

"You're trying to impose a negative servitude on me", you say.

Conclusion


 Anti IP is Communism.



Friday, May 16, 2014

Intellectual Communism - Butler Shaffer on Intellectual Property

Butler Shaffer has given "A Libertarian Critique of Intellectual Property".   Sadly, Shaffer's book is not libertarian, and has nothing to do with property. It ends up being another shallow propaganda rant for the Intellectual Communists.

After acknowledging, correctly, that a libertarian society is founded on respect for property rights, Shaffer sets out to prove that intellectual property (IP) is illegitimate, and nothing more than a tool of the coercive state. Seemingly wishing to analyze intangible goods on the same logical grounds as physical goods, Shaffer asks the pertinent question up front:
How do [property] interests come into existence? (p.17)
But Shaffer never actually addresses this question, certainly not from a libertarian perspective. He never mentions the concept of self-ownership, nor homesteading. He never discusses scarcity and rivalry, the very rationale for property.

Instead, he cites the U.S. Constitution, § 8.8, relating to the rights of authors and inventors, as if it gave birth IP in 1789. Having bypassed any discussion of the philosophy of property, Shaffer hurls hyperbole:
This constitutional authority [to govern copyright and patent] created, in a legal monopolist of violence, the power to create in others monopoly property interests that did not otherwise exist. (pp. 24-25)
This is just a naked assertion. Shaffer does not attempt, let alone succeed, at showing that property rights to intangible works cannot exist but for the state.  Instead, he simply assumes his desired conclusion, stating:
The incompatibility of such an interest with libertarian principles should be apparent. (p.25)
In a word Mr. Shaffer: No. No, the alleged incompatibility of IP with libertarian principles is most certainly not apparent. Whether or not IP is libertarian depends on our understanding of the rationale and ethics of property in general. If intangible goods can meet the critera, then IP is legitimate. If not, then not. 

Briefly, the rationale for property is avoiding conflict over scarce rivalrous goods. I have given my arguments for why and under what circumstances intangible goods must be considered scarce and rivalrous. But at no point does Shaffer even raise the issue. 

Briefly, the correct ethics of property are self-ownership and the homestead principle. I own my body, you own yours. The first person to discover un-owned things and transform them into usefulness is the rightful owner. Producer owns product. I have shown that intangible works are acts of homesteading. Shaffer does not even raise these issues, but instead offers: 
The common law system got it right: because the essence of ownership is found in the capacity to control some resource in furtherance of one’s purposes, such a claim is lost once a product has been released to the public. The situation is similar to that of a person owning oxygen that is contained in a tank, but loses a claim to any quantity that might be released—by a leaky valve—into the air. (pp. 25-26)
Shaffer's analogy to oxygen leaking from a tank into the atmosphere is ludicrous. Oxygen dissolves into the air almost immediately, and becomes indistinguishable from it. In stark contrast, an intellectual object like a song remains perpetually distinct from its surroundings in intellectual space. There are millions of copies of "Hey Jude" in existence, yet we still have no difficulty ascertaining its boundaries. We can tell where it begins, and where it ends. We understand what is "Hey Jude", and what is not "Hey Jude".

What philosophy holds that "the essence of ownership is found in the capacity to control some resource in furtherance of one's purposes" as Shaffer asserts? It certainly isn't libertarianism, and it certainly isn't the Common Law. Under Shaffer's theory, whoever is strong enough to take over a piece of land becomes the rightful owner.

The rightful owner is the homesteader, or those who have contracted with the homesteader in voluntary exchange. It's pretty basic libertarian stuff. Thus, it's downright astonishing that other Mises scholars let Shaffer get away with this shallow sophistry. David Gordon, who wrote the introduction, is one of the sharpest philosophical minds in libertarian circles, yet says nothing about Shaffer's unwillingness to adhere to even the slightest modicum of academic rigor. What is going on here? I digress.

Throughout his book, Shaffer repeatedly refers to IP as a "monopoly". This is the same thinly-veiled scare-tactic employed by Boldrin & Levine. Any property right is a "monopoly", if you want to abuse the term. Property, by definition, is the right to exclusive ("monopolistic") control. Shaffer badly wants to convince us that IP must be a state-granted "monopoly". But in the end, he doesn't even try. 
The notion that the anticipation of monopolistic rewards such as patents and copyrights is essential to the creative process, is negated by much of human history. I am unaware of any copyrights having been issued to writers such as Aeschylus, Homer, Shakespeare, Dante, or Milton; or composers such as Beethoven, Bach, Mozart, Wagner, or Tchaikovsky; or art- ists such as Van Gogh, Michelangelo, Da Vinci, Rembrandt, or Renoir. Were Leon- ardo’s or Gutenberg’s inventions, or the Egyptian pyramids, or the Roman aque- ducts, rewarded by state-issued patents? (p. 27)
Where is the evidence that ancient Egyptians had decent respect for property rights in land? And yet, they built the great pyramids, amazing physical structures that stand to this day. Clearly, great works can be completed prior to a general acceptance of property rights. Does it follow that property rights are therfore invalid? It's an obvious non-sequitur.

It's certainly true that great inventions and works of art occurred before patent and copyright. This is simply due to the fact that intellectual goods are a much more recent development than physical goods. The great increase in intellectual works in the late middle ages gave rise to the need for property rights in them, the same way that building houses and farms gave rise to the need for physical property rights long before that.

Steadfastly refusing to acknowledge even the possibility that IP could be based on actual property theory, Shaffer restates the the utilitarian argument, to then attempt to dismiss it:
But is the premise upon which IP has long been defended—i.e., its importance in making possible creations that benefit mankind—at all valid?  (p. 28)
[W]ho, amongst our earliest ancestors, were granted copyrights for [inventing the alphabet]?  (p.33)
Who, amongst our earliest ancestors, were granted land deed titles? None. Does this invalidate physical property? No. Recall that, in the beginning, Shaffer did suggest that he would apply a consistent standard in comparing physical to intellectual property. He obviously chose not to do so.

Throughout the book, given the lack of any mention of homesteading, or self-ownership, one gets the impression that Shaffer's bent is not particularly libertarian. Then he completely gives away the game, and his communistic mindset is revealed plainly: 
What anticipation of material rewards drove our prehistoric ancestors to make their handprints on the walls of ancient caves in Spain and France? Might they have had no other purpose than to reach their hands 40,000 years into the future to express to us that most fundamental spiritual need for transcendence: “I was here”? (p. 36)
I can think of no better expression of New Socialist Man than what Shaffer has written above. Forget your "anticipation of material rewards". Forget your property rights. It's all about your "fundamental need for transcendence". Wow. Just, wow. 

Having ignored his own question for the entire book, Shaffer restates it at the end:
As asked earlier, to the extent IP interests arise only by way of grants from the state, how can such claims be defended on the basis of libertarian principles grounded in individual liberty and respect for private property? (p.42)
Claims to property rights over intangible goods can indeed be defended on the basis of libertarian principles grounded in individual liberty and respect for private property. That is Intellectual Space.





Tuesday, May 13, 2014

Why Intangible Goods Are Scarce and Rivalrous

We have property rights to avoid conflict over scarce goods. Nearly all things are scarce, or more precisely, "rivalrous". Rivalrous means that the use of the thing by one person interferes with the use by another. Super-abundant goods, like atmospheric air, are not rivalrous. My breathing does not interfere with anyone else's breathing. So, there is simply no need to establish a property right.

It is argued that intangible goods (songs, stories, movies, computer games, software, etc.) are super-abundant, like a "magically reproducing lawnmower" (see Kinsella).  I will show that this assertion is based on a failure to distinguish between producer goods and consumer goods. Once the "use" of producer goods is understood, it becomes clear that intangible goods are rivalrous, justifying intellectual property (IP).


A Song is a Like a Bicycle . . . and a Bicycle Factory

Bicycles are mass-produced in a bicycle factory. A song is mass-produced by making digital copies on a computer.  A bicycle factory does not simply exist, nor does a master song file. Like any other producer good, both factories and master song files must first be created, only then can they be used for mass production.

Making a bike factory or a new song is an act of creation by an entrepreneur. The person who brings this productive capacity into existence is its rightful owner, according the to the homestead principle. The homesteader also owns whatever goods are produced in the factory.

Theoretically there is some finite limit on the quantity of goods that could possibly be produced in the factory over a given period of time. In operating the factory, the owner may attempt to reach that upper limit, or not.  Either way, ownership is not diluted. The homesteader owns 100% of the output from their factory, regardless of how much he or she chooses to utilize.

Bicycles in Physical Space


Suppose John is a bicycle maker. John discovers unowned land, and builds a bicycle factory there. By doing so, John has homesteaded in physical space, because he discovered and transformed unowned tangible raw material into something useful. The factory exists at a unique location in physical space, because other things are at a different longitude and latitude.  We can appreciate the boundary, because the building is distinguishable from its surroundings. By titling the factory and attaching his name, John has staked his claim.

For simplicity, imagine John’s factory as a building with an assembly line and a pile of raw aluminum tubing. With electricity to run the machine, and John’s labor, he can make 48 bicycles in an 8-hour day.

John owns all 48 bicycles produced each day. If he sells a bicycle to Betty, then Betty owns that one bicycle. Betty is now free to ride her new bicycle whenever she pleases. But in no way does Betty own any part of the productive capacity in John’s factory. When it comes to bicycles, the difference between the producer good (the factory) and the consumer good (the bicycle) is obvious, because they are physically distinct.

Betty Makes Bicycle Copies

Suppose Betty noticed that John was only operating his factory 8 hours per day. Late one night, Betty sneaks into the factory. Using her own raw materials and her own labor, Betty runs the assembly line and produces some new bicycles, which she carts away before John returns the next morning.

Has Betty stolen anything from John? Has Betty done anything wrong? Betty may argue that she did nothing wrong. After all, John was using his factory only during the daytime, so Betty’s use did not interfere with John’s use. John is still free to use his factory just as before.

I hope that the flaw in Betty’s argument is apparent.  Betty may not have stolen anything from John, but she trespassed. The reason trespassing is wrong is that the owner of property is entitled to exclude others from using it, even when not using it himself. The owner is entitled to 100% of the use. Betty may assert that she did not interfere with John’s use, but properly understood, she most certainly did interfere. Before Betty’s trespass, John enjoyed 100% of his factory’s productive capacity. Afterwards, it was something less than 100%.

Note that expressing the factory’s total productive capacity as a percentage is crucial. If we were to express the capacity as a quantity, say “48 bicycles per day”, we would arrive at the mistaken conclusion that Betty is allowed to use John’s factory at night.

Songs in Intellectual Space

Now suppose John is a recording artist. John writes and records a new song called “Think This Through”. In doing so, John has homesteaded in intellectual space. He discovered and transformed unowned intangible raw material into a useful new object. The song exists at a unique location in intellectual space because it has a beginning, an end, and unique contents within. We can appreciate the boundary because it is distinguishable from other songs. By titling and attaching his name, John has staked his claim.

 “Think This Through” exists as a digital file on John’s computer. The master song file, the computer, and a stack of blank CDs are like a factory assembly line. With electricity to run the machine, and John’s labor, he can make 48 copies in an 8-hour day.

John owns all 48 CDs produced each day. If he sells a CD to Betty, then Betty owns that one CD. Betty is now free to play her CD whenever she pleases. But in no way does Betty own any part of the productive capacity in John’s factory. When it comes to music, the difference between the producer good (the original song) and the consumer good (a copy of the song) is not obvious, because the copy can also be used as an original.  But the difference is real, and crucially important:
No matter how many bicycles come rolling off the assembly line, there is still only one factory.
No matter how many copies of the song are made, there is still only one song.

Betty Makes Song Copies

Suppose Betty noticed that John was using only his own computer to make copies of “Think This Through”. Betty buys 1 CD and extracts the digital file from it.  Using her own computer, her own raw materials and her own labor, Betty burns new CDs.  Has Betty stolen anything from John? Has Betty done anything wrong?

Betty may argue that she did nothing wrong. After all, John was making CDs with his own computer, so Betty’s use did not interfere with John’s use. John is still free to use his computer just as before.

I hope that the flaw in Betty’s argument is apparent.  Betty may not have stolen anything from John, but she trespassed in intellectual space.  She could not have made the copies of “Think This Through” without first venturing on to John’s intellectual property without permission.

The reason trespassing is wrong is that the owner of a property is entitled to exclude others from using it, even when not using it himself. The owner is entitled to 100% of the use. Betty may assert that by making copies she did not interfere with John’s use. But properly understood, she most certainly did interfere. She interfered with the producer use, not the consumer use

Before Betty’s trespass, John enjoyed 100% of his song’s productive capacity. Afterwards, it was something less than 100%.

Conclusion

Copyright infringement is trespass, not theft. Recognizing the distinction between producer use and consumer use of intellectual objects is crucial to correct analysis. The music industry should continue making the strong utilitarian argument, pointing out that creators will not be compensated without copyright. However, the music industry should also address the philosophical debate over intellectual property by implementing the paradigm of Intellectual Space.

Monday, May 12, 2014

Title-Transfer Theory of Contracts (and other notes to Steve)

A reader named Steve has stated what he believes are central claims of my thesis. He then asserts that he has shown them to be false. These occurred in the the comments section of my post titled "3 Questions . . ."

Following are his statements, with my responses.


1) Because people value so-called "IP," property rights are necessary in so-called "IP."

Intangible goods are scarce and rivalrous

 

People value intangible goods, just as they value physical goods. Just as with physical goods, property rights to intangible goods are necessary because they are scarce and rivalrous.

Briefly, an intellectual work, like a song, is like a factory. At first the song does not exist. Once homesteaded into existence, the producer of the song owns its productive capacity, just as one can build and own a factory. Making copies of a song is like making copies of a widget on the assembly line. The song owner is entitled to 100% of the productive capacity of the song, just as the factory owner is entitled to 100% of the productive capacity of the assembly line.

A person will use their property in a way that brings value. Valuation is subjective. Thus, "use" is subjective.  The producer's use of a song is to exploit it commercially, thus unauthorized copying interferes with the producer's use. Only by presuming that valuation is objective can one decide that copying does not interfere.

Much of Intellectual Space is devoted to an explanation of this concept. In particular, see "Grammy Essay", and "The Alleged Case Against Intellectual Property".


2) Contracts involving so-called "IP" are impossible without assigning property rights in so-called "IP."

No property, no contract 

 

That is exactly correct, contracts involving IP are impossible without assigning property rights in IP.  Please see Rothbard (and indeed Kinsella) on the title-transfer theory of contract. One may only contract with that which is one's own property. If there is no property right in a pattern of ideas, then one cannot buy, sell or license that pattern of ideas.

3) People would only be ostracized if they violated someone's property right.

No property, no wrong

 

We do not ostracize randomly. We ostracize those who have done something wrong.  If there is no property right violation in, say plagiarism, then it is not wrong. Thus, without IP, there is no basis to ostracize.


All legal rights are property rights. Period. All legal wrongs are property violations. Period.


4) People necessarily have property rights in the products of their labor.

Service contracts are title-transfers

 

A person rightly owns the product of his labor, assuming he did not violate the property rights of others in the process. Keeping this in mind helps clarify why a service contract is a contract for the exchange of property titles, just as with any contract.

Suppose you hire me to paint your house. I am renting my physical body to you for some period of time, which I may do because I own my body. You agree to allow me in while I work, which you may do because you own the house. I agree to let you keep the layer of paint on your wall, which is the product of my labor.





Tuesday, May 6, 2014

3 Questions for Stephan Kinsella, Jeffrey Tucker, or Stefan Molyneux

Super Abundant IP? 

Stephan Kinsella and the other Intellectual Communists claim that Intellectual Property (IP) is unnecessary because it is super-abundant, like a "magically reproducing lawnmower" in Kinsella's words.

It is agreed that there is no justification for property rights in super-abundant goods. The best (maybe only) example of a super-abundant good is atmospheric air. Here on the surface of the earth, we find ourselves with more than enough air for every person to breathe. Notice that people never attempt to buy and sell air to breathe. Every person already has all the air they need, delivered right to their faces.

Under water air is scarce. Notice that people do buy and sell air for breathing underwater, in the form of scuba tanks.

Question 1: 

If IP is super abundant, why do people act as though it is scarce? In particular, why do people contract for the delivery of IP (movies, songs, software, video games)?

Contract Requires Property Rights


Kinsella contends that IP are creations of the coercive state, and would not exist in a libertarian world. It is agreed that property rights and voluntary contract are the basis for prosperous free society.  It is a well-accepted principle of contract that one may only contract with that which is one's own property.  I can offer to sell you my car, but I can't offer to sell you my neighbor's car, because I don't own it.


Question 2:

In a world without IP, how could we possibly contract for the intangible goods people want? 
By contracting for the physical containers? That's absurd. Yes, I understand that intangible goods require physical containers to be useful, just as many physical goods require physical containers to be useful. But people do not contract for the delivery of containers. We don't care about containers. We care about content. If the pattern of ideas on a DVD is not rightful property, then there is simply no basis to contemplate buying, selling or licensing such a pattern.

Boycotting Plagiarists

Jeffrey Tucker and Stefan Molyneux have suggested boycott and ostracism as a response to plagiarism in a world without copyright. They believe that consumers will recognize that plagiarism is fraud, and refuse to deal with such a bad guy. They are correct that plagiarism is fraud, but only because a property right is at stake.

By definition, fraud is harming another person by inducing a reliance on a deception. I deceive you, you rely on the deception, and are harmed as a result.

Suppose you write a book, and I plagiarize it, offering it up as my own work. I have deceived you, because we had an understanding that I would not copy your work. You relied on my deception, because you trusted me. Under copyright law, I have harmed you because I interfered with your intellectual property.

But if there is no property right in the authorship, then who have I harmed? The true author? No, because I did not take or interfere with the author's property. Did I harm readers of the book? No, the content of the book is the same regardless. Are the readers harmed because they don't enjoy the benefit of the reputation of the true author? No, reputation is another form of intellectual property, and a rather tenuous one at that.

Absent copyright, plagiarism is not fraud.

Question 3:

Why would you ostracize a plagiarist, when the plagiarist has not violated anyone's property right?
Is the plagiarist wrong simply because plagiarism is dishonest? No. Lying is only wrong when done to deprive another person of property. Deceiving a robber about the location of your valuables is virtuous.

Tucker and Molyneux are quite correct that the free market would punish plagiarists. This is simply an admission that people recognize the property rights violation that plagiarism is.


Stephan Kinsella, Jeffrey Tucker, Stefan Molyneux, or any other Intellectual Communists are invited to answer.





Monday, March 10, 2014

Grammy Foundation Essay Submission

(Note: This essay was originally directed to members of the Grammy Foundation, i.e. music business people, under the title "Intellectual Space"). 

 

SYNOPSIS 

 

Angry over our successful lawsuits curtailing access to “free” music, and now aging into positions of influence, the Napster Generation embraces a philosophical argument against copyright, based on the notion that intangible goods are not scarce. 


Intellectual Space establishes a new paradigm allowing intellectual works to be understood and analyzed in the same manner as physical objects; showing them to be scarce, rivalrous, and rightful property; while exposing the fallacy in the anti-copyright argument. 


PROBLEM: THE NAPSTER GENERATION


A Brief History of Digital Piracy (Our Public Relations Nightmare)

Copyright has been the law of the land for over 300 years. Whether ignorant or defiant of the law, by the turn of the 21st century millions of mostly young people were using peer-to-peer sites like Napster to illegally copy and distribute song files. While copying a recording had always been a technical possibility, ever since Edison’s wax cylinder, the advent of digital media and the internet made copies perfect, easy, and extremely cheap.

Successful copyright-infringement lawsuits were brought by the music industry against Napster, other file sharing sites, and against individuals. Now deprived of access to free music, disappointment among music fans was predictable. The visibility of the court actions highlighted our enforcement power under copyright law, consequently allowing the Recording Industry Association of America (RIAA), record companies, and successful artists to be portrayed as bullies. Music had a public relations problem on its hands.

To address the public relations issues, the RIAA created public service ads promoting the concept that “copying is theft”. This memorable slogan seems morally self-evident to us in the music business. If I have created a piece of music, why should someone else be allowed to exploit it without my permission? Aren’t property rights in intellectual works a settled matter? Unfortunately, in the minds of the Napster Generation, the answer is no.

War for the Mind of Napster Generation

While legal battles have been won, the philosophical war is not over. Books such as Stephan Kinsella’s “Against Intellectual Property” offer ammunition to a Napster Generation eager to defend their iPods full of pirated songs. Kinsella, a patent attorney, denounces all of intellectual property - copyright, patent, and trademark – as allegedly being unnecessary and morally unjustifiable.

Kinsella first does an admirable job of explaining the rationale for property rights in general.  Physical goods like land, food, and manufactured items are scarce and rivalrous. That is, goods are limited in abundance. The use of something by one person interferes with use by another. Both of us cannot farm the same one plot of land, nor eat the same one apple.

Because physical objects are scarce and rivalrous, human conflict over their use is inevitable. To avoid conflict, we need a system of property rights. “Property” is a legal construct allowing us to decide who may use a given resource, while excluding others.

But according to Kinsella, intellectual works are not scarce:

[I]f you copy a book I have written, I still have the original (tangible) book, and I also still “have” the pattern of words that constitute the book. Thus, authored works are not scarce in the same sense that a piece of land or a car are scarce. If you take my car, I no longer have it. But if you “take” a book-pattern and use it to make your own physical book, I still have my own copy.

Such intangible goods are allegedly “free goods”, and  “super-abundant ”, like a “magically-reproducing lawnmower”, so disputes cannot arise over their use. Therefore, Kinsella concludes, there is simply no justification for intellectual property.

Our legal actions forced music consumers to begin paying for music they had become accustomed to getting for free. Many were also led to consider the moral and philosophical basis for copyright law, an uncomfortable task for those with devices full of downloaded content. Meritorious or not, it is hardly surprising that Kinsella’s anti-copyright argument finds support in the general public. More troubling is that Kinsella’s thesis has apparently been persuasive to creative types as well.

Copying is Theft! Or . . . is it?

Nina Paley is the writer-director of the animated feature “Sita Sings the Blues”. After being made to pay a significant license fee for songs used in her film, Paley became an anti-copyright activist and “artist in residence” at QuestionCopyright.org. She has penned the song “Copying is Not Theft”. Her lyric expresses the anti-copyright argument succinctly:

    Copying is not theft
    Stealing a thing leaves one less left
    Copying it makes one thing more
    That's what copying's for

    
Copying is not theft
    If I copy yours you have it too

    One for me and one for you

    That's what copies can do

    
If I steal your bicycle you have to take the bus
    But if I just copy it there's one for each of us!

Paley is right. “Theft”, synonymous with the common law crime of larceny, means taking and carrying away something rightly owned by another, with the intent to permanently deprive. Copying a song file neither carries away the original, nor deprives the owner of listening.

Our Problem Persists

We can see there is a problem here. Copying does not appear to be theft. Intellectual works can be duplicated without limit. The anti-copyright “non-scarcity” argument seems to have merit, at least superficially. Meanwhile the RIAA is characterized as a greedy leviathan tyrant. The Napster Generation, many of whom now reject intellectual property per se, are a decade older, and gradually aging into positions of influence.

Are we right or wrong? Is there a philosophical justification for the copyright law we enforce? If so, what is it?  And if intellectual property is justified, then what is the fallacy in our opponent’s position? And most importantly, how to we communicate this to the Napster Generation?

Artists Will Starve! Or Will They? And So What If They Do?

Our recent efforts at addressing the copyright debate have focused largely on what could be called a “utilitarian” argument: How could the creators of books, music, films, and video games possibly earn a living if others were allowed to copy the work? Nobody is going to finance any large entertainment project absent copyright protection. Without the profit motive, entertainment would be reduced to amateurs and perhaps a handful of philanthropic ventures. Counter-arguments regarding “alternative business models” notwithstanding, the utilitarian reasoning is powerful and persuasive. We should continue to bang the utilitarian drum.

However, the utilitarian argument does not appeal to everyone. Many in the Napster Generation lean somewhat libertarian in their political thinking. Do the manufacturers of buggy whips or slide rules have a right to make a living? Is copyright merely a coercive tool of the state, used to prop up a dinosaur entertainment industry that should be allowed to fail, or remake itself and adapt to a changing world? That is how many see it. For them, copyright must be argued and justified in philosophical terms.

Moving Forward

What is needed is a philosophical paradigm that allows intellectual property to be understood and justified on the same terms as physical property, and which exposes the logical fallacies of the anti-copyright argument advanced by Kinsella, et. al. This theory must be logically sound, and able to withstand rigorous academic challenge. At the same time, it must yield simple analogies and examples, making it accessible to the lay person. I believe Intellectual Space is that paradigm.

The Doctrine of Intellectual Space allows an intellectual object, such as a song, movie, book, or software to be visualized in the same manner as a physical object. This greatly facilitates the otherwise confusing task of comprehending property rights over intangible goods.

SOLUTION: INTELLECTUAL SPACE


The Paradigm

Intellectual Space is an array of unique locations, like physical space. Vast quantities of raw intellectual matter are scattered around intellectual space, just as vast quantities of physical matter are scattered around physical space. Words and symbols of human language constitute the basic building blocks of intellectual matter, just as atoms and molecules are the basic building blocks of physical matter.

Random words and symbols are useless to people, like aluminum-bearing bauxite ore lying dormant in a hillside. But through human ingenuity and effort, raw material can be discovered, brought forward, re-arranged, and transformed into a more useful pattern. Aluminum can be fashioned into a beautiful new bicycle. Words and musical notes can be fashioned into a beautiful new song.

Just as with physical matter, patterns of intellectual matter can have identifiable boundaries and be stable across time, allowing them to be understood as discrete objects.

For Example, a Song

A new song exists at a unique location in intellectual space, because it is different than that which has come before. A new song has a boundary, because we can tell the difference between what is inside from what is outside. A new song is temporally stable, because it is the same today as it was yesterday. A song is an intellectual object.

Musicians have the ability to bring a new song into existence and deliver it to others. This satisfies the human desire to be entertained. It is useful. A song has all the necessary characteristics of economic goods.

The act of creating a new song is homesteading intellectual property, because it represents the discovery and transformation of raw matter into a useful object, just as bringing aluminum out of the hillside is homesteading physical property. The homesteader is the rightful owner of the new object, and is entitled to 100% of its use.

Consumer Goods vs. Producer Goods

Objects that are directly useful to consumers are called consumer goods. Consumer goods may be replicated and mass-produced, so as to satisfy a large demand. To make replication practical and efficient, a productive capacity, i.e. a factory, must first be homesteaded into existence. The factory is also a good, called a producer good. Producer goods are used to make consumer goods.

The difference between producer goods and consumer goods is quite obvious in physical space: a factory is different than the things that come rolling off its assembly line. But in intellectual space, there is this fascinating feature: an intellectual object can function as either a producer good or a consumer good, depending on how it is being used at the time.

For example, a digital song file is a consumer good when being used for listening enjoyment, but is a producer good when being used for making copies. The failure to distinguish between consumer and producer usage is at the very root of the anti-copyright fallacy. As the following analogy illustrates, copying actually does interfere with the owner’s use, the producer use, but not the consumer use.

Unraveling the Anti-Copyright Fallacy

How are things like bicycles and song files actually able to be copied? And what are the ownership rights involved? To unravel the anti-copyright fallacy, and arrive at a philosophically sound theory supporting intellectual property, we will compare bicycles in physical space with song copies in intellectual space. To begin, let us first consider the homestead principle.

The Homestead Principle


“Homesteading” is the process by which un-owned things come to be owned in the first place. In homesteading land during the frontier days, it was not enough to simply discover unowned land. Rather, it was necessary to bring land under “dominion and control”, which means transforming it into usefulness, for example by planting crops.

Homesteading is discovering and transforming things in a way that can fulfill human wants and needs. Homesteading is an act of creation, and the object created is rightly owned by the homesteader. Modernly, any kind of production can be considered homesteading.

A Song is a Like a Bicycle . . . and a Bicycle Factory

Bicycles are mass-produced in a bicycle factory. A song is mass-produced by making digital copies on a computer.  A bicycle factory does not simply exist, nor does a master song file. Like any other economic good, both factories and master song files must first be created, only then can they be used for mass production.

Making a bike factory or a new song is an act of creation by an entrepreneur, and the person who brings this productive capacity into existence is its rightful owner, according the to the homestead principle. Ownership is not diluted. The homesteader owns 100% of the output from their factory, regardless of how much he or she chooses to utilize.

Bicycles in Physical Space


Suppose John is a bicycle maker. John discovers unowned land, and builds a bicycle factory there. By doing so, John has homesteaded in physical space, because he discovered and transformed unowned raw material into something useful. The factory exists at a unique location in physical space, because other things are at a different longitude and latitude.  We can see the boundary. By titling the factory and attaching his name, John has staked his claim.

For simplicity, imagine John’s factory as a building with an assembly line and a pile of raw aluminum tubing. With electricity to run the machine, and John’s labor, he can make 48 bicycles in an 8-hour day.

John owns all 48 bicycles produced each day. If he sells a bicycle to Betty, then Betty owns that one bicycle. Betty is now free to ride her new bicycle whenever she pleases. But in no way does Betty own any part of the productive capacity in John’s factory. When it comes to bicycles, the difference between the producer good (the factory) and the consumer good (the bicycle) is obvious, because they are physically distinct.

Suppose Betty noticed that John was only operating his factory 8 hours per day. Late one night, Betty sneaks into the factory. Using her own raw materials and her own labor, Betty runs the assembly line and produces some new bicycles, which she carts away before John returns the next morning.

Has Betty stolen anything from John? Has Betty done anything wrong? Betty may argue that she did nothing wrong. After all, John was using his factory only during the daytime, so Betty’s use did not interfere with John’s use. John is still free to use his factory just as before.

I hope that the flaw in Betty’s argument is apparent.  Betty may not have stolen anything from John, but she trespassed. The reason trespassing is wrong is that the owner of property is entitled to exclude others from using it, even when not using it himself. The owner is entitled to 100% of the use. Betty may assert that she did not interfere with John’s use, but properly understood, she most certainly did interfere. Before Betty’s trespass, John enjoyed 100% of his factory’s productive capacity. Afterwards, it was something less.

Note that expressing the factory’s total productive capacity as a percentage is crucial. If we were to express the capacity as a quantity, say “48 bicycles per day”, we would arrive at the mistaken conclusion that Betty is allowed to use John’s factory at night.

Songs in Intellectual Space

Now suppose John is a recording artist. John writes and records a new song called “Think This Through”. In doing so, John has homesteaded in intellectual space. He discovered and transformed raw material into a useful object. The song exists at a unique location in intellectual space because it has a beginning, an end, and unique contents within. We can see the boundary because it is different than other songs. By titling and attaching his name, John has and staked his claim.

 “Think This Through” exists as a digital file on John’s computer. The master song file, the computer, and a stack of blank CDs are like a factory assembly line. With electricity to run the machine, and John’s labor, he can make 48 copies in an 8-hour day.

John owns all 48 CDs produced each day. If he sells a CD to Betty, then Betty owns that one CD. Betty is now free to play her CD whenever she pleases. But in no way does Betty own any part of the productive capacity in John’s factory. When it comes to music, the difference between the producer good (the original song) and the consumer good (a copy of the song) is not obvious, because the copy can also be used as an original.  But the difference is real, and crucially important:

No matter how many copies of the song are made, there is still only one song.

No matter how many consumer goods come rolling off the assembly line, there is still only one factory.
Suppose Betty noticed that John was using only his own computer to make copies of “Think This Through”. Betty buys 1 CD and extracts the digital file from it.  Using her own computer, her own raw materials and her own labor, Betty burns new CDs.  Has Betty stolen anything from John? Has Betty done anything wrong?

Betty may argue that she did nothing wrong. After all, John was making CDs with his own computer, so Betty’s use did not interfere with John’s use. John is still free to use his computer just as before.

I hope that the flaw in Betty’s argument is apparent.  Betty may not have stolen anything from John, but she trespassed in intellectual space.  She could not have made the copies of “Think This Through” without first venturing on to John’s intellectual property without permission.

The reason trespassing is wrong is that the owner of a property is entitled to exclude others from using it, even when not using it himself. The owner is entitled to 100% of the use. Betty may assert that by making copies she did not interfere with John’s use. But properly understood, she most certainly did interfere. She interfered with the producer use, not the consumer use. 

Before Betty’s trespass, John enjoyed 100% of his song’s productive capacity.

Afterwards, it was something less.

Conclusion

Copyright infringement is trespass, not theft. Recognizing the distinction between producer use and consumer use of intellectual objects is crucial to correct analysis. The music industry should continue making the strong utilitarian argument, pointing out that creators will not be compensated without copyright. However, the music industry should also address the philosophical debate over intellectual property by implementing the paradigm of Intellectual Space.

Glossary

Intellectual space – a theoretical array of unique locations

Intellectual matter – that which can be understood through language

Intellectual object - an ascertainable, temporally stable and bounded pattern of intellectual matter which can condition the outcome of human events

Intellectual property – a non-trivial, homesteaded rivalrous intellectual object that substantially functions as productive capacity


















 See Wikipedia Statute of Anne Wikipedia (October 20, 2013 11:35 AM) http://en.wikipedia.org/wiki/Statute_of_Anne

 See Wikipedia Napster Wikipedia (December 9, 2013 9:02 AM) http://en.wikipedia.org/wiki/Napster

 See A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001)

 See for example Sean W., How the RIAA is a Bully Picking on the Little Guys Lazy Tech Guys (2011) http://lazytechguys.com/commentary/how-the-riaa-is-a-bully-picking-on-the-little-guys/

 Kinsella, Stephan Against Intellectual Property Ludwig von Mises Institute (2008) http://mises.org/books/against.pdf

 Id., p. 32

 Id., p. 31

 Paley, Nina Copying is Not Theft blog.ninapaley.com (September 20, 2013) http://blog.ninapaley.com/2009/12/15/minute-meme-1-copying-is-not-theft/

Saturday, October 5, 2013

Can There Be a Property Right in Value?

Abstract

There must be a property right in the market value of things, because otherwise a legal system is impossible.

All legal rights are property rights, all legal wrongs are property violations. Legal remedies aim to restore property ("make the victim whole"). Restoring the physical integrity of damaged property is often impossible, thus the need for awarding money damages. The reduction in market value to the damaged property is the only rational measurement for money damages.  Since damages awarded must be based on a property right, there must therefore be a property right in the market value of things. Absent a property right in value, a legal system can impose only barter damages, not money damages. A legal system with only barter damages will fail for the same reason that a barter economy fails.


Introduction

Can a person assert a valid property right over the value of something? Or is a property claim limited to the thing's "physical integrity"? This question ends up being crucial to the issue of intellectual property, for two reasons:

First, if sound economic theory finds that a property right can only pertain to physical things, then obviously intellectual works, like songs, movies, novels and computer games cannot be property.

Second, showing that intellectual goods are rightful property depends on showing that they are, by their very nature, scarce and rivalrous goods. The rivalrous nature of an intellectual work comes from the creator's desire to exploit the work commercially, by selling copies of it on the market. A competitor who makes and sells unauthorized copies interferes with the creator's use, which is measurable by the reduction in market value of the creator's original work. If there can be no property right in value, then the unauthorized copier's actions cannot be construed as trespass.

Hans-Hermann Hoppe's "The Idea of Law in a Private Society"

In  "The Idea of a Private Law Society" (quoted below), Austrian economist Hans-Hermann Hoppe has explained why, in his view, there cannot be a property right in value. I will show that Hoppe's finding must be incorrect, and that it must be possible to hold a property interest in the value of something.

To understand why there must be a property right in value, we must assume that a correct theory of economics will allow for a viable legal system. Conversely, we must also assume that any conclusion reached by economic reasoning which makes a legal system impossible must be erroneous. If you are not willing to assume the necessity of a viable legal system in society, then read no further.

The Rationale for Property

Begin by imagining a state of nature. Humans are much like wild animals, with no sense of right and wrong, and no concept of property. We could call this a state of total freedom.  A man takes what he wants, with nary a thought of who it might "belong" to. Because there are many people, who all want things, conflict ensues.

In such a world, one of the things that people come to want is the elimination of conflict. And thus is born the concept of property. Property is the idea that we can decide who has the right to use a given thing, and the concurrent right to exclude everyone else from using it.

Property represents a step away from total freedom, because it naturally imposes restrictions on allowed behavior. The reasonable person is willing to impose such restrictions on himself because he understands, through reason, that a society with property rights will be one of peace and prosperity, while a society without property rights will be one of conflict and poverty. Hoppe has given a beautiful exposition of the rationale in his "The Ethics and Economics of Private Property".

It is important to scrutinize this chain of reasoning. We start with a theory of "total freedom". Working forwards, we deduce that total freedom leads to an undesirable outcome, and conclude that there must be an error in that theory, because it does not produce our intended result (a peaceful, prosperous society). We then work backwards, modify "total freedom" to include property, work forward again and get a much better result. I wish to underscore that in social theory "working backwards" from a desired conclusion is, to a certain extent, inevitable.

We first assume that avoiding conflict is a desired outcome, then invent property rights to solve the problem. Similarly, we must assume that a viable legal system is a desired outcome. Let us now discover what problems arise in the implementation of law in a libertarian world, and what we must invent as a solution.

The Rationale for Money Damages

The purpose of law is to provide a set of rules governing the conduct of people, and a mechanism by which people who have been harmed by the wrongdoing of others may be compensated. Correctly understood, all rights are property rights, beginning first and foremost with the right of each person to own his or her own physical body. All laws flow from the protection of property rights. All legal wrongs should be understood as a violation of the property rights of another.

The most fundamental concept in compensating victims is "damages". It is not enough to merely note that a victim has been harmed by the wrongdoing of another. We must be able to measure the magnitude of harm. Then, we must have a viable method of transferring the compensation from the wrongdoer to the victim.

In most cases, the simplest and best method to "make the victim whole" is to determine the reduction in market value caused by the offense, then make the wrongdoer pay that amount of money to the victim. There are many different types of legal situations that requires remedy, and the Common Law has devised others sorts of remedies besides money damages (e.g. "replevin", which is forcing a thief to give back the stolen goods). But money damages is, by far, the type of remedy that applies to the greatest number of cases.

Clearly, a viable legal system must have the ability to award money damages. I hope it is plain to the reader that a legal system attempting to impose compensation by barter is not viable for the same reasons that an overall barter economy is not viable.

What Does Hoppe's Conclusion Imply About Damages?

Suppose then that we accept Hoppe's conclusion that there is no property right in the value of a thing. Rather, a property right exists only in its "physical integrity". Suppose you own a car, and a trespasser comes along and smashes the car up with a baseball bat, because he is angry that his former girlfriend fell in love with you. In Hoppe's world, you have a property right only in the physical integrity of the car. The legal system could catch the wrongdoer, and find him liable to you. But what are the damages?

In Hoppe's world, the damages in the car smashing example are a broken windshield, dented hood, slashed tires, etc. We can order the wrongdoer to restore the physical integrity of your car. Technically, this is impossible, under the physical laws of entropy. We cannot reverse time, and magically put your car back in the state it was before.

Lacking magic, repairing your car is the next best thing, but what does that really mean? It doesn't mean restoring the physical integrity of your car, rather it means restoring the value of your car, as best as possible. Let's temporarily ignore the fact that, here in Hoppe's world, you don't have a property right in the value of your car. Unless the wrongdoer is himself a skilled mechanic, he will need to purchase materials and the labor services of a mechanic, to fix the car. This is kind of possible, but we'll run into all sorts of problems regarding which substitute materials are acceptable. 

But suppose the car is smashed up so badly that it is literally impossible to repair. What then? Do we order the wrongdoer to buy you a new car? What if your car was not new at the time of the smashing? Must we obtain a new car, and then attempt to inflict whatever wear-and-tear had occurred to your car? Are you beginning to see the problem?

Students of Austrian economics will recognize these clumsy transactions to be quite similar to the types of problems experienced in socialist economies, which lack meaningful prices. The lack of market prices makes rational economic calculation impossible, as proven theoretically by Mises, and empirically confirmed by history.

A Viable Legal System is Impossible Without Money Damages

A viable legal system is impossible without market prices on damages for the same reason that a viable economic system is impossible without market prices in general - rational economic calculation positively requires it. Without accepting the idea that one may have a rightful property interest in the value of a thing, then there is simply no basis whatsoever to consider market value in assessing damages.

Therefore, there must be a valid property right in value, and there must be some error in Hoppe's logic, which I will explore below. If you wish to dispute this finding, it is incumbent upon you to demonstrate why a legal system is unnecessary, or how a barter system of damages might work, or how money damages might otherwise be measured.

I've shown that that there can be valid property rights in the market value of things, because otherwise a legal system is not viable. Of course, this does not mean that one automatically obtains a valid property right in something simply because it has value. The difference between those two propositions lies in the distinction between individual valuation vs. market valuation.

Individual Value is Subjective

One of the more important and insightful findings of Austrian economics is that value is subjective. Two people encounter the exact same object, and come to completely different opinions about what it is worth. As the old saying goes, "one man's trash is another man's treasure."

Not only might it be the case that two people value the same thing differently, it is almost always so. Far from troubling, this is one of the most amazingly beautiful facts about humans, because this subjective valuation is what makes trade possible. When two people make a voluntarily exchange, they demonstrate that they value the things being traded in reverse order. I value what I get from you more than what I give up, while you value what you get from me more than what you give up.

Market Value is Objective

Individual valuation is indeed wholly subjective. It cannot be measured, except in order of preference. I might say that I like apples more than grapefruit, but it makes no sense to say I like it 3 more, or 7 more. However, market valuation is different than individual valuation. In a monetary economy, through the interaction of many people, each with subjective preferences, objective market prices emerge. While it makes no sense to contemplate how much an individual values something, it makes perfect sense to contemplate how the market values something.

Analyzing Hoppe on Property Rights in Value

With this in mind, let me turn now to Hoppe's piece on property rights in value. Note that Hoppe assumes in his definitions here that property must be physical, an assumption obviously I do not share. However, for the purpose of discovering the error in Hoppe's reasoning, I shall allow the assumption that property must be physical, and show that even with that assumption, Hoppe does not disprove the validity of a property right in value.
Hoppe:  [P]roperty ownership means the exclusive control of a particular person over specific physical objects and spaces. Conversely, property rights invasion means the uninvited physical damage or diminution of things and territories owned by other persons. In contrast, a widely held view holds that the damage or diminution of the value (or price) of someone’s property also constitutes a punishable offense.
Hoppe is quite correct that it is a "widely held view" that there is a property right in value. The majority can be wrong, of course, but Hoppe would do well to confront the possibility that at least some in that majority have hit upon the idea that a legal system is theoretically impossible without a property right in value, as I've explained above.
Hoppe: As far as the (in)compatibility of both positions is concerned, it is easy to recognize that nearly every action of an individual can alter the value (price) of someone else’s property. For example, when person A enters the labor or the marriage market, this may change the value of B in these markets. 
Stop. Did you see what Hoppe did right there? First, he frames the debate as asking whether damage to the value of property can be a punishable offense. But then, he uses entry into a labor market as his example. Did Hoppe establish that some person rightly held a property interest in the labor market? No he did not. Of course it is wrong to think that entering the labor market is a punishable offense, even though it lowers somebody else's value on that market. But the reason it is wrong is because nobody owns a property interest in the "labor market", not because it is categorically impossible to hold a property right in the value of something.
Hoppe: And when A changes his relative valuations of beer and bread, or if A himself decides to become a brewer or baker, this changes the value of the property of other brewers and bakers. According to the view that value damage constitutes a rights violation, A would be committing a punishable offense vis–vis brewers or bakers.
In the above hypothetical, A is asserting a bogus claim to property, because A has done nothing to constitute an act of homesteading that would confer a property right allowing his control over that market.  But just because Hoppe cites one example in which there is no property right in value, does not mean there can never be a property right in value. One could just as easily construct a hypothetical in which A asserts a bogus claim to physical property.

Hoppe proceeds to discuss remedies, and finally drops the bombshell:
Hoppe: If A is guilty, then B and the brewers and bakers must have the right to defend themselves against A’s actions, and their defensive actions can only consist of physical invasions of A and his property. (emphasis added)
And there you have it. In Hoppe's world, money damages are impossible. And he admits it, right there. I strongly encourage Hans-Hermann Hoppe to continue forward from this point, exploring the praxeological implications of a legal system that forbids the assessment of damages based on market value. I believe he will collide headlong with the calculation problem, and quickly determine that such a system is completely non-viable.

Conclusion

Hoppe's fundamental error ought to be clear by now. His reasoning is that because some  property claims in value are bogus, that all property claims in value are bogus. That's a fallacy. And it is a fallacy even assuming that property rights must only apply to physical things. Even in a world without IP, a theory finding no property right in value is fatally flawed.

That said, the argument that property must be physical is also wrong. The doctrine of Intellectual Space provides the framework to understand and apply strict libertarian principles to intangible objects. Doing so demonstrates that, like all forms of intellectual property, a property right in value is valid when it is created by an act of homesteading.