Myhrvold's Gulch

Recently some friends and I were discussing the left-intellectual move of noting positive state economic institutions and arguing from there that the state is constitutive of the economy and therefore what the state giveth, the state taketh away. From my disciplinary perspective as an economic sociologist, a field that was greatly influenced by Polanyi, it strikes me as self-evident that all economic activity is shaped by institutions like the state enforcement of property rights. The right has it’s own version of this which underlies suspicion of cronyism and monetary policy. So basically, you didn’t build that.

However, the thing is that most of the time I think the state basically does it right, and in particular that enforcing (natural) rights is different from creating (positive) rights. However, it gets interesting when you think the state institutions are really really bad and so allocations of wealth are based on terrible institutions. There’s a big difference here between the Yglesias “neoliberal + T&T” types and the Myerson “#fullcommunism” types in that the former support our basic institutions but occasionally use their contingent nature as one of several justifications for the welfare state, whereas the latter would ideally like to radically reshape the institutions themselves. Aside from the punitive laicite, I would be pretty happy in a Yglesias utopia (I’ve visited Scandinavia, it’s nice) but in the Myerson utopia I plan to live in the mountains with my high school football team and shout “Wolverines!” after ambushing the Bolivarian Guard convoys.* However there’s something logically consistent about the #fullcommunism view of let’s change the institutions vs the “you didn’t build that” non sequitur to justify Medicaid expansion.

I like to think about the social nature of economic institutions as a continuum. On the one hand you’ve got the fact that part of the reason I enjoy privacy in my home is because I could call the cops if squatters tried to force their way in, but aside from sophistry or freedom of association gotcha, who cares? On the other hand, it can be helpful to imagine situations where we have really awful institutions that have resulted in allocations of wealth.

Let’s call this the Myhrvold’s Gulch problem.**

Intellectual property law is much more obviously socially constructed than our other economic institutions if for no other reason than property rights to rivalrous goods are partially self-enforcing whereas property rights to non-rivalrous goods are very obviously positive institutions of the state (and in historical perspective look more like royal monopolies than property rights, as seen with the stationers’ guild, etc). Moreover, they result in great wealth, and it is easiest to see this not in companies like Disney or Microsoft that benefit from the Bono Act and trade diplomacy to suppress foreign piracy but also created incredibly useful art and software, but with companies like Intellectual Ventures that are purely parasitical and whose only useful purpose for society is to give a more concrete focus to our musing on the nature of positive economic institutions as a sort of Lisbon earthquake of economics.

So what is to be done? Do we say that Nathan Myhrvold’s legal but unjust wealth means that we should let him continue to extract it but the state will apply confiscatory taxation? Or maybe the kludgeocracy version of the same thing, which is to not tax him but mandate that Intellectual Ventures cross-subsidize socially useful and/or redistributive activities? Or even vaguer but more realistic versions that since Myhrvold benefitted from bad laws that therefore all rich folks should be taxed more heavily or that all companies should pay at least $10/hour to unskilled workers? This is essentially the logic of you-didn’t-build-that-ism. However it seems like if you’ve got a problem with our IP institutions (as I most certainly do), the more logical thing is to reluctantly let Myhrvold keep his millions, but reform patent law so that we don’t have problems with patents going forward.

* I didn’t actually play high school football. However, I’m hoping though that there will be some group of athletic young people who will accept a man in his late 30s in mediocre shape with minimal outdoors or firearm experience as one of their own. ** I shudder to make an Ayn Rand reference even in jest. I’m not an objectivist, I’ve never read any of her books, I had to look up the “Galt’s Gulch” reference, and I frequently chuckle thinking about nasty things that Whitaker Chambers said about Ayn Rand decades before I was born.