Hayek and knowledge commodification

I want to resume my four-part critique of F. A. Hayek’s conception of knowledge by exploring what some scholars refer to as the commodification of knowledge. (For an overview of this anti-capitalist literature, check out this book, which sells for $113 and is ironically titled: Not for Sale, the cover of which is pictured below. )

In summary, the commodification literature has two broad intellectual strands: one normative; the other descriptive. The normative part exposes the nefarious role of research universities and science labs in the production of knowledge. See, for example, this guide for educators on neoliberalism or this essay on “The danger of commodifying knowledge” by Alex Nolting, who advocates for radical reform of higher education. The descriptive side, like this informative and wide-ranging paper on “Biocolonialism and the commodification of knowledge” by Laurie Anne Whitt, compares and contrasts western methods of knowledge production with indigenous ones.

But what relevance or connection does this commodification literature have to Hayek’s argument in “The use of knowledge of society” that market prices reflect hidden information–information that is dispersed among many different individuals? In brief, the connection between commodification and Hayek’s argument has three logical steps, which I will outline below. (Before proceeding, however, I want to thank Josephine Baker, a researcher at the New School for Social Research in New York City, for bringing this connection to my attention during her excellent and informative talk at the Southern Economic Association on 21 November 2022.)

  1. Step one is that intellectual property rights (like patents, trade secrets, and copyrights) make it possible for some forms of knowledge to be “commodified” (i.e. owned by private companies or individuals), and these intellectual property rights can be very valuable.
  2. The next step involves the exclusive nature of these IP legal rights: when a private individual or firm has intellectual property rights over an idea (patent and trade secret law) or over the expression of an idea (copyright law), he becomes a monopolist since he is the exclusive owner of that idea.
  3. The last part of this argument combines steps 1 and 2: when knowledge is commodified via intellectual property law (i.e. when ideas are privately owned), the owners of these ideas have a powerful economic incentive to jealously guard their exclusive rights. This incentive, in turn, has the ultimate effect of distorting prices by making it more difficult for ideas to freely spread.

Alas, this is not only a bad argument; it is a naïve one. Why? There are two reasons why. First off, just because people and firms are able to use IP law to assert exclusive rights over their ideas does not mean that there can’t be a competitive market in those ideas. In fact, markets make it possible for people to transfer property rights in the first place. By allowing people to own ideas, we not only create an incentive for people to create new ideas, we also make it possible for those ideas to be traded!

Secondly, IP law in actual practice is not as one-sided or as pro-owner as the anti-commodification literature makes it out to be. Copyrights, for example, are subject to the fair use defense; trade secrets can be reverse engineered; utility patents expire after only 20 years. Yes, we can debate the definition of “reverse engineering” or whether the fair use doctrine should be construed more broadly by the courts or whether the patent system as a whole promotes or hinders technological innovation, but what is not up for discussion is my larger point that markets require property rights. In fact, markets are all about transferring property rights. Without property rights, you can’t have markets, and without markets, you can’t have real-time prices.

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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1 Response to Hayek and knowledge commodification

  1. Pingback: A fourth and final critique of Hayek: knowledge or beliefs? | prior probability

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