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From:   "Paul L. Allen" <pla@softflare.net>
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Date:   Fri, 28 Dec 2001 19:31:22 +0000
To:   email@greglondon.com
Subject:   tpog

TPOG reminds me of the curate's egg: good in parts. It contains flaws which make me wonder about the validity of its conclusions (not that the conclusions are necessarily incorrect but that their derivation cannot be validated). For starters you seem to have fallen prey to Marxist belief that value is conserved in a commodity transaction. You allow for a slight discrepancy between buyers' and sellers' markets without pondering the consequences of that. You are not alone in that because the use of money in transactions obscures facts a little. Consider a barter between a sheep farmer and a pig farmer whereby they exchange a pig and a sheep of roughly equal meat content and which took roughly equal amounts of labour to rear. According to you this is an exchange of roughly equal value. Now consider that the sheep farmer has tried raising pigs but doesn't have the knack of it: he could raise 10 sheep with the amount of labour that it takes him to raise one pig. Also, since he eats mutton and lamb every day the sheep farmer is more than a little bored with sheep and craves the taste of pork which to him is of much greater value because it is a welcome change and because it would cost him 10 times as much effort to raise. The pig farmer is in the mirror position. So, far from exchanging goods of approximately equal value, each has gained immensely by the transaction. Each has obtained something he prizes in exchange for something that to him is of little value. Each has profited thereby. The profit may be notional, but if each were to raise the animal he has difficulty with rather than exchange with each other the cost of those animals would have been far greater. In this case, each has expended far less labour to obtain the animal. The use of money obscures this fact a little. However, for any item you can name you will find some people who think that the monetary price is a bargain and willing to pay much more; you will also find some people who think that the monetary price is excessive and would not purchase unless it were half the price. The monetary price of any item reflects not just its cost of manufacture, distribution and a profit margin but also what people are willing to pay. Retailers find that the elasticity of demand allows them to pick a price that maximizes return. Too low means more sales but these are more than offset by lower profit. Too high means greater profit but this is more than offset by reduced sales. Any monetary value attached to an item is at best an approximation to some statistical mean. To consider another aspect. Apples, flour and sugar each have a specific subjective value to a person. Each person has a different subjective value which determines whether or not the objective value asked for those items is one he is prepared to pay. A good cook may purchase those items and turn them into an apple pie whose value many people will deem far higher than the cost of the raw goods and the labour involved simply because his apple pie is far better than those made by anyone else. In contrast a bad cook can take those ingredients and turn them into an apple pie that is inedible garbage that nobody would pay for. The idea that value (or "energy" as you call it) is conserved is false. It is not an objective metric in the first place (what you treasure I deem trash) and it can be both created (by a good cook) or destroyed (by a bad one). Any analysis that starts with the presumption that value is an objective metric which is conserved is fundamentally flawed. Marxism started out with that premise and the result was economic collapse of a large empire. The next problem is with the history of IP rights. Historically, trade secrets were all there were and they were not granted by governments but coined by the simple process of finding a new way of doing things and keeping it secret. Naturally this applied more frequently to the processes of manufacturing something than the item itself. It is difficult to conceal what a bicycle looks like but it may be possible to conceal the process by which the steel is drawn into tubes suitable for making the frame. Historically, patents were introduced to *entice* those who successfully kept secret their trade secrets into revealing them with a promise of a limited period of protection. It offered them a gamble. They could keep the trade secret and hope that nobody else figured out how they did it (a risk because what one man can think of so can another) or they could reveal the secret in return for guaranteed protection for a number of years. It was never the intention to make them a gift, as you claim, since those who had successfully kept trade secrets for a long time and could reasonably expect to keep them for much longer still had no need for a "gift" such as that. It was an offer to gamble. Whether or not a person chose to gamble depended on his assessment of the risks and the payoffs. A subjective value decision. It is debatable if the grant of a patent fits your own definition of a gift exchange. The purpose of creating a system of patents was indeed for public benefit since it was hoped that by releasing a trade secret which one person might never take any further that others would be able to expand upon it and create new techniques and inventions that they would not have thought of had the original secret not been revealed. But the reason a particular individual would decide to apply for a patent rather than keep something a trade secret is not to benefit the public but to maximize revenue from that technique or invention. It is also my recollection (which I have not checked) that the penalty for revealing a trade secret applies ONLY to those who gained knowledge of that trade secret DIRECTLY from the holder of that secret. I.e., an employee may not reveal his employer's trade secrets and there are penalties for doing so. Should somebody else stumble across the idea independently and tell the world about it, that is without penalty. If you have seen court decisions which say otherwise then it is my understanding that they are wrong. Finally, and this is unpardonable, your strong belief that contracts should apply only to items which are leased for a period of time and that outright purchases should not have a contract. It is true that many purchases have no need of a WRITTEN contract. However, the ESSENCE of contract law is that there is a "mutual exchange of considerations." The exchange of money for goods IS a contract between two parties even if there is no accompanying paperwork. It transfers the right of ownership in exchange for money, for a deed or for any other consideration. Contract law is quite clear that there must be a mutual exchange of considerations for contract law to apply. Contract law does not apply to gifts or to promises because those are unilateral. Any exchange of goods for money (or other considerations) may have written terms and conditions which both parties must agree to. This is not something that is designed to treat one party unfairly (although it may be abused that way) but a simple fact of law. In US jurisdiction in particular, contractual terms may be stricken by a court unless they are equitable to both parties (UK law is less particular about this and is concerned primarily with whether or not both parties understood the terms to mean the same things and were fully cognizant of their implications). A properly-drawn contract PROTECTS people from the other party to the contract defaulting in some way on that which they should have delivered. -- Paul
 
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