WIPO: Informal Economy Innovates In The Absence Of Intellectual Monopolies

from the well,-look-at-that dept

One of the problems with the debates around copyright and patents is that they too often assume that intellectual monopolies are necessary in order to promote innovation or even basic economic activity. But that overlooks all kinds of domains where that’s not true. In the field of technology, free software and the other open movements based on sharing are familiar examples of this kind of thing. Less well known so are the so-called “informal economies” found in many parts of the world.

To its credit, WIPO has commissioned a report on this whole area, entitled “Conceptual study on innovation, intellectual property and the Informal economy” (pdf). Here’s how it defines the informal economy (IE):

The most appropriate conceptualization of the IE is as a continuum from formal to informal, where different activities and actors occupy different points along this continuum. The transition from informal to formal status is gradual; single firms, households, and workers may carry out some activities informally and others formally at the same time.

Despite that vagueness, the informal economy is important for many countries:

Estimates suggest that over the past two decades, informal employment or employment in the IE made up more than half of non-agricultural employment in most middle- and low-income countries. Sub-Saharan Africa is the region with the largest estimates for the contribution of the informal sector to gross domestic product (GDP): the IE makes for nearly two-thirds of GDP including agriculture and half of non-agricultural gross value-added (GVA). It is followed by India, with around 50% of total GDP. Then come countries from the Middle East, North Africa and Latin America.

For Techdirt readers, the most interesting part of the report will probably the chapter that concerns the use of what it calls “Mechanisms to appropriate returns from innovation in the informal economy”, including “formal appropriation” through intellectual monopolies — or, rather, their absence:

On the one hand, it can be argued that the absence of formal appropriation and the work in clusters make up the strengths of the IE’s innovation system. In this view, the innovation system in the IE largely rests on “collective learning experiences” based on low entry barriers and free flows of knowledge. The dynamics among similar enterprises in collective geospatial clusters determine rates of innovation, economic successes and the value of the cluster. Individual firms or economic units are not the key determinants of innovation and efficiency.

Appropriation efforts must also be considered in light of the social systems — specifically family structures, community networks and commercial clusters — within which the IE operates. Knowledge flows are characterized by trust, reputation, reliability, social and cultural signaling, and the willingness to pool resources and collaborate. This facilitates access to information, and critically reduces transaction costs.

Clearly, in this context, the notion of formal appropriation of ideas can be considered alien and inadequate in this IE context. As one study suggests, actors believe that formal IP based on exclusions and proprietary knowledge is not compatible with the knowledge diffusion and learning processes of the IE which are based on communities, clusters and the exchange of information.

Naturally, as a report commissioned by WIPO, the opposing viewpoint is also considered:

On the other hand, and in contradiction to the above view, it has been argued that the presence of perpetual copying and absence of appropriation mechanisms is seen as a barrier to scaling up innovative activity in the IE. Entrepreneurs are unable to develop their businesses beyond a certain stage as they lack exclusive rights to or control over their innovations. Therefore, they have fewer incentives to invest in machines or human capital (e.g., training new apprentices), and are unable to reach certain economies of scale.

Firms may also forgo the possibility to specialize in different styles and techniques, as copying is the norm. The absence of branding or certificates/labels, leading to anonymity of the sector’s products in the eyes of consumers, is said to prevent producers of good quality products from being rewarded.

Due to this systematic effect, only small incremental improvements in processes and some incremental improvements or adaptation of products are likely to be achieved. Economic growth and productivity gains in the informal sector are hence below par. The IE might also have a negative influence on the formal sector. The reasoning behind this is that informal firms that fail to comply with various economic regulations or to meet their tax obligations are able to expand and take market share away from formal firms, even when they are less efficient overall. At worst, economists are concerned that informal firms may also undermine the incentives of formal sector firms to innovate, adopt new technologies, develop their IPRs or develop brands.

There seem to be a lot of assumptions in there — for example, that those operating in the informal economy don’t pay their taxes fully. That’s conflating the black economy, where taxes are certainly dodged, with the informal economy, which is about how work is organized, not its compliance with the law.

Similarly, the assertion that companies will give up innovating just because others don’t try to patent everything they produce is contradicted by the experience of open source, which eschews patents, but has driven an accelerated pace of innovation in the world of proprietary software.

Despite these biases, the report is a valuable contribution to an area that has been largely overlooked until now. The more that WIPO and its world become cognizant of the very different nature of the informal economy, the better it will be for them — and for future debates about patents and copyright.

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Comments on “WIPO: Informal Economy Innovates In The Absence Of Intellectual Monopolies”

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out_of_the_blue says:

That's nice, but WE live in terminally predatory capitalism.

“Appropriation efforts must also be considered in light of the social systems — specifically family structures, community networks and commercial clusters — within which the IE operates. Knowledge flows are characterized by trust, reputation, reliability, social and cultural signaling, and the willingness to pool resources and collaborate.”

Used to be that way here, too. But that era is over for us.

“Intellectual property” is a valid notion even though the now predatory Born Rich are using it for obvious evil. Your arguments are basically futile from the start because The Rich control every market and entire economy, are almost to the point of “privatizing” basic public properties such as roads and water. Existing monopolies are THE major point, so overwhelming in degree that carping about small pieces of the societal milieu is just stupid. You’re here nearly every weekday, minion, complaining about what The Rich do, without apparently ever grasping the central fact.

Adam Smith is no longer relevant: in the stage of capitalism here the “invisible hand” is totally visible, and it’s a mailed fist. We need revolutionaries who see the big picture, not another “report is a valuable contribution” blah blah, “debates” going nowhere.

Anonymous Coward says:

Re: That's nice, but WE live in terminally predatory capitalism.

Explain to everyone how mercantilism renamed capitalism is predatory capitalism?

IP laws are mercantile practices dude, don’t you ever read anything?


Debit and Credit by Gustav Freytag

A Short View of the Laws Now Subsisting with Respect to the Powers of the East

An Inquiry Into the Nature and Causes of the Wealth of Nations by Garnier and Smith


Goes contrary to IP laws, where is the capitalism in a market create by governments not the need to trade?

Fraking ignorant dweeb.

Anonymous Coward says:

Re: That's nice, but WE live in terminally predatory capitalism.


Here is one of many stories that repeat themselves over and over again.

The guy Alan Bond had an idea for a new propulsion system in 80’s, he obviously patented, after securing some funding from the British government and Rolls Royce, the patents were marked “classified” material by the British government and he couldn’t talk to anyone after the same government withdrew funding, twenty years later after the patents lapsed he restarted looking for funding and investor and made another company to build an SSOL(Single Stage to Orbit Launcher), but this time around he didn’t patent anything is all protected by the old trade secrets.

BBC Four: The Three Rocketeers (Documentary 45 min)

The tools used by the rich to keep reach are the exclusionary tools that so keep defending, the same tools that allow “to big to fail” to happen without any safety net(competitors) for that event.

Arthur Treacher says:

Re: That's nice, but WE live in terminally predatory capitalism.

“Intellectual property” is a valid notion

How do you figure, OOTB2? Given that more than one person can have an idea whose property is that idea? Lookup Knuth-Morris-Pratt string matching (http://en.wikipedia.org/wiki/Knuth%E2%80%93Morris%E2%80%93Pratt_algorithm) – hardly trivial, yet discovered at least twice. Many other computer algorithms suffer from the same problem. Also, spread-spectrum frequency hopping radio: http://en.wikipedia.org/wiki/Frequency-hopping_spread_spectrum#Multiple_inventors

So, whose property is KMP? Whose property is spread spectrum frequency hopping radio?

ScytheNoire (profile) says:

Information Age needs a lot of work

I keep telling myself that things will get better. We are just at the start of the information age. Things swing back and forth. So we are quickly approaching the extreme of one side and soon it will swing back the other way.

I keep telling myself so I feel like there is hope for the future. If we keep on the path we are on, mankind is screwed.

Anonymous Coward says:

Company Size

Entrepreneurs are unable to develop their businesses beyond a certain stage as they lack exclusive rights to or control over their innovations.

Another reason for not scaling up is that they have enough income, and do now want to sell their company to a capitalist.
Scaling up almost always result in the management, and then the workers being replaced. hat is why their are so many serial entrepreneurs. These are people who like running a small company, and hate corporate boardrooms with all their political infighting.

Ninja (profile) says:

Open source and other successful stories that don’t rely on Intellectual Property laws tend to be disregarded as failures or lack of development by the IP supporters simply because they don’t make shitloads of money. I mean, how do you measure success?

So developer A produces some set of softwares that are freeware and make enough money to live comfortably but not in luxury while having a small extra for equipment maintenance and upgrading whereas developer B makes billions with the same type of software but with fancier UI and a few extras that facilitate the end-user lives.

Is dev A a failure? Or is he successful in building a decent software? And how does dev B make millions if there is software that do the same for free? Could we say dev B is successful in adding value to software already available for free?

It is very relative. For me both devs are as successful as any other person making a living of what they love to do as their main “jobs” and revenue. The difference here is that dev B only thrives with light IP protections in place while if there’s a more lenient system both of them can thrive. Both of them will have to work to provide a decent product though.

Anonymous Coward says:

Re: Re:

Who has more fish?

The guy who got to the store and bought one because he had more money or the guy without no money who got to a river and caught one?

This is what I hear when people ask who has more wealth.

Is not about money is about producing, bees have central government or an economy as we know it and they still manage to create a social environment for themselves, but they need to produce something, they work for it, unpaid and anonymously and so they thrive that is until the workers stat dying.

This is why open source works, because it has workers, it doesn’t matter why they do it, what is important is that work is being done, this will be true for any scheme devised.

We can even have healthcare for everyone without money if we so decide we want to. We just need to do the work.

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