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Monday, October 18, 2010

SBE Council’s IP and the Economists #3: Do IP Protections Matter? Just Ask Uncle Miltie

When I teach my graduate students about economics, I usually mention that the late Milton Friedman was one of the leading economists of the twentieth century – a Nobel Prize winner – and that many free-market economists affectionately refer to him as “Uncle Miltie.”

So, what did Uncle Miltie have to say about protecting intellectual property? As usual, it was clear, direct and absolutely correct. Friedman made the case for rewarding creators in his 1962 book Capitalism and Freedom:

“In both patents and copyrights, there is clearly a strong prima facie case for establishing property rights. Unless this is done, the inventor will find it difficult or impossible to collect a payment for the contribution his invention makes to output. He will, that is, confer benefits on others for which he cannot be compensated. Hence he will have no incentive to devote the time and effort required to produce the invention.”

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

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