I really do wonder how much “intellectual property” has to do with profitability in the real world. I know that its owners believe that it is everything but remember that no controlled experiments are possible in the world of human action. The author might believe that disaster would result from failing to use copyright. The inventor might be certain that the world would collapse without the patent power. But the belief alone doesn’t make it true. Businesspeople commonly mix up cause and effect as they look through the distorted glass of their rear-view mirror and try to gain insight on how they will manage the uncertainties of the future.
A main contributor to profitability is the so-called first-mover advantage. If you get there before your competitors get there — or before your competitors are even aware that they should be striving to get there — you have a large and potentially sticky marketing advantage. The first to make and market an innovation enjoys a certain fame and prestige that can last long after the initial period of profitability (e.g. Bayer aspirin). This has nothing to do with IP enforcement.
I’m writing as vast throngs of people sit in wild anticipation of tomorrow’s release of “Dark Knight Rises.” And yet, we all know that in a matter of weeks or even days, there will be streamed copies online. There could be hundreds and thousands of them. At first, the quality will be terrible. Later, the quality will improve. By this time next year, you will be able to download an HD copy of your own without too much trouble. And this is despite the millions and billions of dollars, and the gigantic apparatus of the state, plus all the warnings and jails, dedicated to preventing this this inevitable thing.
And yet: what does it matter? “Dark Knight Rises” will still make a zillion dollars. I like millions of others will shell out to see it in the theater of course. Like everyone else, I want to consume it sooner rather than later. Sure, I could save $11 bucks by waiting but there’s a time-preference issue. The movie makers are going to make a mint with clever management, clever marketing, and a high-quality product. In other words, they will make money the old-fashioned way: getting people something they want in a form in which they want to consume it.
I can easily imagine that not much would be different about this scenario if there were no IP — except that a major element of fear and force would be purged from the system and consumers would no longer be treated as the thieving enemy.