Against the Copyist’s Socialism (II): Mises’s Problem
Series, part two of three. The abolitionist cites Mises as if Mises were on his side. He was not.
Series, part two of three. The abolitionist cites Mises as if Mises were on his side. He was not. Mises identified a genuine economic problem — the inexhaustible services of a disclosed creation, and the external economies that flow from it — and called the legal response a question of the delimitation of property rights, not a verdict of illegitimacy. And the deeper point that delimitation reveals is that all developed property is institutional, so the charge that intellectual property is “artificial because it requires law” indicts the whole architecture of ownership
Keywords: intellectual property, Ludwig von Mises, external economies, public goods, non-rivalry, inexhaustibility, delimitation of property rights, appropriability, Stephan Kinsella, institutional property, De Soto, dead capital, copyright, patents.
Abstract
The first essay in this series removed the costume: it showed that the anti-intellectual-property argument is an anarchist politics wearing the name of Austrian economics, and that Mises and Hayek were not anarchists. This second essay takes up the economic substance, and it begins where the abolitionist most wants to claim Mises and least deserves to. Mises did discuss patents and copyright, in Human Action, and the abolitionist treats this discussion as an endorsement. It is nothing of the kind. What Mises did was identify a problem with a precise structure. The services of an intellectual creation — a formula, a recipe, a design, a text once disclosed — are inexhaustible: a known formula, in his words, renders unlimited services, and does not lose anything of its capacity to produce however often it is used, so that in this respect it is not an economic good at all but a free good. But the production of that creation is costly, and the cost is borne by one person, before disclosure, under uncertainty. Put the two together and you have what Mises called the extreme case of external economies: the creator produces a benefit that others enjoy without paying for it, because once the creation is disclosed its non-rival services flow freely to all. Mises’s conclusion from this was not that intellectual property is illegitimate. It was that the matter is “a problem of the delimitation of property rights,” and that with the abolition of patents and copyright authors and inventors would, for the most part, become producers of external economies. He drew the economic implication and, as Kinsella’s own footnote concedes, expressed no opinion on the legal answer. The abolitionist converts this neutral diagnosis into a dogma — non-rival, therefore never property — that Mises never stated and that does not follow from anything he said. The essay then develops the moral and economic consequence Mises’s framing exposes: abolishing intellectual property does not remove cost or coercion from the world; it relocates them, forcing the originator to internalise the cost of creation while the imitator externalises the benefit, so that the creator becomes an unpaid producer for others under the banner of “freedom.” Finally, the essay turns the abolitionist’s central slogan — that intellectual property is “artificial” because it depends on the state — against the whole of property. All developed property is institutional. A field exists in nature; ownership of the field does not. Land title, mineral rights, water rights, mortgages, company shares, debts, negotiable instruments, and trusts are every one of them institutional layers laid over a natural substrate, none of them found lying in the world, all of them constituted by law. Intellectual property slots into precisely the same architecture. The objection “it requires law, therefore it is artificial” does not isolate patents and copyright; it indicts land title and the share certificate and the mortgage with exactly equal force, and an argument that abolishes all property to reach intellectual property has refuted itself, not its target.
I. The passage the abolitionist wants, and what it actually says
The anti-intellectual-property writer reaches for Mises early, because Mises is the most authoritative name available to him and because Mises did, unlike many economists, address the question directly. The reach is understandable. It is also a misreading, and the misreading is worth correcting in detail, because once Mises’s actual structure is on the table the abolitionist’s use of him collapses.
Here is what Mises actually did. In the part of Human Action dealing with the limits of property rights and the problems of external costs and external economies, he observed that certain things have a peculiar economic character: their services are inexhaustible. A formula, a recipe, a piece of technological knowledge, once it is known, can be used without limit and without depletion. Mises’s own example is the recipe for preparing coffee: a thing rendering such unlimited services, he wrote, is the knowledge of the causal relation it embodies; the recipe, provided it is known, renders unlimited services, does not lose anything of its capacity to produce however often it is used, has an inexhaustible productive power, and is therefore not an economic good. Such recipes, he said, are as a rule free goods, because their ability to produce definite effects is unlimited. This is the non-rivalry point that the abolitionist treats as decisive — and Mises stated it first and more precisely than the abolitionist does.
But Mises did not stop where the abolitionist stops, and the continuation is everything. The reason intellectual creation poses a problem rather than simply a happy abundance of free goods is that the inexhaustible services have to be produced, and producing them is costly. The formula is a free good once it exists and is known; bringing it into existence is not free at all. Mises identified this directly as the extreme case of external economies: the characteristic mark of the formula, he wrote — the mental device directing a technological procedure — is the inexhaustibility of the services it renders, and the extreme case of external economies is shown in the production of the intellectual groundwork of every kind of processing and constructing. The creator bears the cost of producing something whose services, once disclosed, flow without charge to everyone. That is the external economy: a benefit conferred on others that the producer cannot capture.
Figure 1. Mises’s diagnosis, not a verdict. Inexhaustible services plus costly production yield an external economy; Mises called the legal response a question of delimitation and took no side on it.
And now the decisive sentence, the one the abolitionist never quite quotes in full. Having laid out the external-economy structure, Mises drew his conclusion, and his conclusion was a careful refusal to draw the abolitionist’s. The matter, he said, is “a problem of the delimitation of property rights,” and with the abolition of patents and copyright, authors and inventors would for the most part be producers of external economies. That is the whole of it. He did not say patents and copyright are illegitimate monopolies. He did not say non-rival goods can never be property. He said the question is one of delimitation — of where a legal order should draw the boundary of property rights around a good whose services are inexhaustible — and he noted the economic consequence of drawing it one way rather than another. Kinsella himself, in a footnote to Against Intellectual Property, concedes exactly this: Mises, he writes, expressed no opinion on the issue, merely drawing the economic implications from the presence or absence of such laws. The abolitionist’s own text admits that Mises did not hold the abolitionist position.
So the structure of the abolitionist’s appeal to Mises is precisely backwards. He takes a thinker who identified a problem and declined to prescribe a solution, and he presents him as having prescribed the abolitionist’s solution. He takes “this is a question of where to draw the boundary” and reports it as “there is no boundary to draw.” This is not interpretation; it is inversion. Mises diagnosed; the abolitionist forges a verdict and signs Mises’s name to it.
II. Why “non-rival, therefore not property” does not follow
It is worth pausing on the inference the abolitionist actually needs, because stated plainly it is a non-sequitur, and Mises’s framing is what exposes it.
The abolitionist argues: the services of a disclosed creation are non-rival; non-rival goods cannot sensibly be owned, because ownership is a device for allocating things that cannot be used by everyone at once; therefore intellectual property is not property. The hidden premise is the middle one — that non-rivalry is disqualifying, that a good whose services are inexhaustible is for that reason ineligible to be the object of a property right. But nothing establishes that premise, and Mises’s analysis quietly denies it. Mises says the services of the formula are inexhaustible and that in respect of those services the formula is a free good. He does not say that the creation cannot be the object of a delimited legal right. On the contrary, by framing the matter as one of delimitation, he treats it as an open question whether and how a legal order should define such a right — which presupposes that defining one is at least possible and possibly desirable, not that it is conceptually ruled out.
The reason non-rivalry does not disqualify is that property rights do not exist only to ration scarce services among competing users. They also exist to secure to a producer the return on a costly act of production, so that the act will be undertaken. Rationing is one function of property; appropriability is another. A good can be non-rival in its services and still pose an appropriability problem in its production, and it is the second problem, not the first, that intellectual property addresses. The abolitionist’s inference works only if rationing is the sole legitimate function of property — only if a right that secures appropriability rather than rationing scarce use is somehow not a real property right. But that is exactly the question at issue, and it cannot be settled by definition. Mises did not settle it by definition. He named both sides of the problem — the inexhaustible services and the costly production — and left the delimitation to be worked out. The abolitionist settles it by definition, in his own favour, and calls the result Austrian.
III. The creator as unpaid producer for others
Develop now the consequence that Mises’s external-economy framing makes unavoidable, because it disposes of the most seductive line the abolitionist has: that abolishing intellectual property simply restores market freedom, removing a coercive state-granted privilege and letting exchange flow unobstructed. Mises’s analysis shows that this is false. Abolition does not remove cost or coercion from the world. It relocates them.
Consider what the producer of an intellectual creation actually does, and when. An inventor invests time, capital, experiment, repeated failure, and finally disclosure — and the disclosure is the very act that makes the knowledge available to others. An author invests labour, thought, research, structure, and the long uncompensated period of composition. A designer invests creative judgment and technical refinement; a developer invests architecture, implementation, testing, and documentation. Every one of them bears the cost of production before the outcome is known, before the market has revealed whether the work will succeed, under the full weight of uncertainty. And every one of them acts first. The copier, by contrast, arrives afterwards. He acts only once the uncertainty has been resolved by someone else, once the valuable form has been revealed and its market demonstrated. He bears the cost of reproduction, which is small, not the cost of production, which was large; and he bears no risk, because the risk was discharged by the creator before he arrived.
Figure 2. The creator as unpaid producer for others. Abolition relocates cost rather than removing it: the creator internalises the cost of production while the imitator externalises the benefit.
This is the point at which the abolitionist’s vocabulary does its concealing work, and Mises’s vocabulary undoes it. The abolitionist calls the copier’s freedom to reproduce “the free market” and the creator’s wish to control reproduction a “state-granted monopoly.” But what is actually happening, in Mises’s terms, is that abolition forces the originator to internalise the cost of creation while permitting the imitator to externalise the benefit. The creator becomes a producer of external economies — a person who bears a private cost and confers a public benefit he cannot capture. There is no neutral, coercion-free baseline here that abolition simply restores. There is a choice between two rules, each of which determines who may take from whom. Under a regime of delimited rights, the creator may exclude the copier from the created form for a defined period and thereby capture some of the return. Under abolition, the copier may take the created form from the creator the moment it is disclosed. Abolishing intellectual property does not abolish coercion from the world. It changes who may take: the copier from the creator, under the moral perfume of “freedom.” Mises’s external-economy framing is what lets us see this clearly, because it identifies the loss — the uncompensated benefit conferred on others — that the abolitionist’s vocabulary is designed to hide.
None of this, it must be said carefully, settles the policy question by itself. That abolition makes creators producers of external economies does not prove that any particular patent term is optimal, or that copyright should last as long as it does, or that the existing statutes draw the boundary in the right place. Mises’s point, and this essay’s, is narrower and more durable: it destroys the glib claim that abolition is a simple restoration of market freedom. It is not. It is a rule choice that reallocates the value of created forms away from those who create them and toward those who copy them, and it must be defended as such, on its consequences, not smuggled in as the mere absence of an artificial interference.
IV. The institutional foundation of all property
Now turn the abolitionist’s central slogan against the whole of property, because the slogan — that intellectual property is “artificial” because it depends on the state for its existence — is the move that, followed consistently, destroys far more than its author intends. This is the deepest lesson of Mises’s word “delimitation,” because delimitation is an institutional act, and all property requires it.
Begin with the thing the abolitionist treats as the paradigm of natural, pre-political property: land. A field is physical; you can stand on it, plough it, fence it. But ownership of the field is not physical and is not found in nature. The field exists in the world; the title does not. Ownership of land requires boundaries that someone has surveyed and recorded, a system of registration, rules of priority between competing claimants, mechanisms of conveyance and inheritance, remedies for trespass and dispossession, and an apparatus of enforcement. Strip all of that away — strip away the survey, the registry, the court, the sheriff — and you do not have natural property in land; you have a field that the strongest or the most numerous can occupy until someone stronger or more numerous arrives. What converts the physical field into owned property is an institutional layer laid over the natural substrate, and that layer is constituted by law.
And what is true of land is true of every developed form of property, without exception. Mineral rights require a legal separation of the subsurface estate from the surface. Water rights require allocation rules. A building’s ownership runs through deeds, mortgage priorities, remedies, and enforcement. A company’s assets are owned through corporate law, the share, and the doctrine of limited liability — none of which is a physical thing. A debt is an enforceable obligation, given effect by the law of contract and, where it is embodied in a negotiable instrument, by commercial law. A bank balance is a structured claim recognised by accounting convention, contract, and statute. A warehouse receipt, a bill of lading, a trust interest — each is an institutional construction, an artifact of law laid over some underlying fact, and each is unquestioningly treated as property.
Figure 3. All developed property is institutional. Intellectual property slots into the same architecture as land, shares, and debt; the “requires law” objection cannot isolate it.
The abolitionist’s slogan, set against this, proves far too much. He says patents and copyright are artificial because they require law to exist and to be enforced. But land title requires law to exist and be enforced. The company share requires law. The mortgage, the debt, the negotiable instrument, the trust — every one of them requires law, and none of them is found in nature. If “requires legal recognition” entails “artificial privilege rather than genuine property,” then the entailment does not stop at intellectual property; it sweeps through the entire architecture of ownership, dissolving land title and corporate shares and secured debt along with copyright and patent. The title deed is not a natural object. The cadastral map is not a fruit of the soil. The share certificate is not a cow. The mortgage is not a rock. Yet each belongs to the architecture of property, and each is constituted by exactly the kind of legal-institutional act the abolitionist treats as disqualifying when, and only when, the asset in question is an intellectual creation.
The Peruvian economist Hernando de Soto built an entire account of development around this insight, though from the other direction: his thesis is that the assets of the poor in the developing world remain “dead capital” — incapable of being mortgaged, traded, or leveraged — precisely because they lack the formal institutional layer of title and registration that converts a physical holding into legally cognisable property. The physical house exists; without the institutional layer it cannot function as property. De Soto’s point and Mises’s word “delimitation” meet here. Property is not the brute fact of a thing; it is the institutional delimitation of rights over a thing. And once that is seen, the abolitionist’s demand that intellectual property justify itself by being natural, tangible, and pre-political is revealed as a demand that no property can meet — not land, not shares, not debt, not money. The demand is not a principle that intellectual property happens to fail. It is a solvent that destroys property as such, applied selectively to the one form the abolitionist has decided to dislike.
V. What Mises leaves us, and what comes next
Gather the thread. Mises did not hand the abolitionist a weapon; he handed him a problem, and the problem cuts the other way. He saw, more precisely than the abolitionist sees, that the services of a disclosed creation are inexhaustible and in that respect free. But he saw the other half too — that the creation must be produced at a cost borne by one person before any return — and he named the result the extreme case of external economies. From this he drew not a verdict but a question: how a legal order should delimit property rights around such a good. He took no side on the answer, as the abolitionist’s own footnote admits. To present Mises as an abolitionist is to invert him.
And the word he chose, delimitation, opens onto the deeper point. Delimitation is an institutional act, and all developed property rests on institutional acts of exactly this kind. The field is not property until it is surveyed, titled, and defended; the company is not owned until corporate law constructs the share; the debt is not collectible until contract and commercial law give it force. Intellectual property is one more delimitation of rights over one more kind of valuable thing — a created form rather than a parcel of land or a bundle of corporate claims — and it is constituted by law in precisely the way they are. The abolitionist’s charge that it is “artificial because it requires law” is therefore not an argument against intellectual property in particular. It is an argument against property in general, and an argument that proves too much refutes itself.
What remains is the political half of the abolitionist’s case — the claim that because these rights depend on the state, specifically, they are illegitimate, and that a stateless order could secure complex property and exchange without them. That claim is Hayek’s territory, and it is the subject of the third and final essay, “Hayek’s Courthouse,” which will show that the rule-bound institutional order Hayek spent his life describing is not the enemy of the market but its precondition, that small government is not no government, and that the anti-intellectual-property argument, taken to its root, is not a defence of the market at all but a path to socialising created value — and, behind it, all value — through the back door. Mises gave us the economics of the created good. Hayek gives us the institutions without which no good, created or natural, is property at all.
References
Mises, primary-
Mises, Ludwig von. Human Action: A Treatise on Economics. 3rd rev. ed. Chicago: Henry Regnery, 1966. Page-level anchors: p. 128 (the coffee recipe; a known formula “renders unlimited services,” “its productive power is inexhaustible; it is therefore not an economic good”); p. 364 (”such recipes are, as a rule, free goods as their ability to produce definite effects is unlimited”); p. 661 (the external-economy structure; “the extreme case of external economies”; “this is a problem of the delimitation of property rights”; with abolition, authors and inventors “would for the most part be producers of external economies”).
The anti-IP position under examination-
Kinsella, N. Stephan. “Against Intellectual Property.” Journal of Libertarian Studies 15, no. 2 (2001): 1–53. See n. 38: “Mises expressed no opinion on the issue, merely drawing the economic implications from the presence or absence of such laws” — the concession that Mises did not hold the abolitionist view.
The economics of appropriability (the structure Mises anticipated)-
Arrow, Kenneth J. “Economic Welfare and the Allocation of Resources for Invention.” In The Rate and Direction of Inventive Activity, 609–626. Princeton: Princeton University Press (NBER), 1962. (Inappropriability and the disclosure paradox.)
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Landes, William M., and Richard A. Posner. “An Economic Analysis of Copyright Law.” Journal of Legal Studies 18, no. 2 (1989): 325–363. (Fixed cost of expression vs near-zero cost of copying.)
The institutional character of property-
De Soto, Hernando. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. New York: Basic Books, 2000. (Untitled assets as “dead capital”; property as a legal-institutional construction over a physical substrate.)
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Searle, John R. The Construction of Social Reality. New York: Free Press, 1995. (Institutional facts; status functions; how collective recognition constitutes ownership.)
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Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340 (1991). (Originality, not effort, as the basis of copyright — relevant to delimitation, against a labour rationale.)
Note on method and scope. Every quotation attributed to Mises reflects the verified wording of Human Action (3rd rev. ed., 1966) at the cited pages, checked against the text, not drawn from an abstract or secondary paraphrase. The claim sometimes attributed to Mises that intellectual creations stand outside property because they are “immaterial, intangible, and impalpable” is not Mises’s wording and is not used here; his actual distinction is the inexhaustibility of the services a disclosed formula renders, and it is represented as such. This is the second of three essays. It argues that Mises diagnosed an external-economy problem and treated the legal response as a matter of delimitation rather than illegitimacy, and that the institutional character of all property defeats the “artificial because legally constituted” objection. It does not claim Mises endorsed intellectual property — he expressly did not — and it does not defend any particular statute, term, or scope; the legitimacy of Austrian criticism of overbroad or abusive regimes is a question of delimitation, conceded throughout. The political half of the abolitionist case — the appeal to statelessness — is addressed in the third essay.