Chapter 5: Topics in the Economics of Property Law
1. What can be privately owned?
- Distinguish private and public goods to answer question. Private ownership is only appropriate when
there is a rivalry for the goods and when it is excludable.
Patent, copyright, trademark system all protect intellectual property
oInnovation causes temporary disequilibrium
oNonappropriability (information cheap to transmit), information becoming increasingly
oTherefore unregulated market will undersupply creat ive work/innovation and thus four
Subsidize/supply art and science by state
Trade secrets protection
Intellectual property law (patent, copyr ight, trademark act as temporary
monopolies, trademark is permanent monopoly)
Intellectual Property Law – encourages creat i on and dissemination (trade off), optimal patent
duration is one which encourages the latter and discourages the former
Patent s, 20 year monopoly granted for invention by US Patent Of f ice,
also breadth requirements are stated, how similar inventions can be, broad rule gives rights to first
inventor, nar row rul e exclus ive rights to first, property rights to second
If social value of investment on developing applications > social value of investment on research,
then NARROW patent
2. How are ownership rights establi shed?
- Property law encourages production, discourages theft and reduces cost of protecting goods. People
agree to establ ish property rights to share the benefits from increased producti vity. Coase/Hobbes
3. What may owners do with their property?
- maximum liberty, courts may rule otherwise in case of negative externalities where remedies are