I hinted earlier that I had a take on the Posner-Weyl Harberger taxation idea and its applicability to copyright law. As a short summary of the idea, Harberger taxation basically means that each owner self-assessed their property’s worth, and register it (and pay a tax proportional to their self-assessed value). The twist is that anyone can consult the list of assessed values, and then force you to sell at that value. This incentivizes you to be honest. Posner and Weyl in their recent slapstick comedy duo fashion troll everyone by talking about how everything should be Harberger taxed. They focus on some interesting intellectual exercises — properly Harberger taxing sets of things that have complementary values (I have an X and a Y, and my joint valuation of the basket is higher than my individual value of X and Y, etc.) It’s a fairly trolly piece, and it succeeds at trolling Matt Levine, Tyler Cowen, Matt Klein. They even throw in some blockchain ideas in section 2.6, for maximum bait value.
There are lots of immediate objections to Harberger taxation which totally miss the point. People argue that this produces an undue burden, and you’d have to constantly update the assessed value. This isn’t really true, you could easily bake in things to an actual Harberger policy like a 5% price premium to the assessed value, an automatic year-on-year inflation-indexed increase, etc. Harberger taxes still suffer from the “widow-gets-forced-out-of-her-home problem”, which while being stupid policy, is very politically potent. (The argument gets trotted out anytime anyone proposes semi-reasonable property taxes).
I, however, love Harberger taxation. They solve a technically complicated problem: how do you value illiquid assets for tax purposes? The usual solution is to have an expert assessor, which has its own massive problems. And most existing tax regimes don’t need to be changed to a Harberger tax regime. Income taxes, capital gains taxes all already have good valuation functions, and do fine. But an area that is in sore need of Pigouvian taxation is intellectual property.
Intellectual Property is a pure creation of the state. If the justification for property taxes is that they are protected by the state, IP is nothing without state protection. Furthermore, extant IP claims have negative externalities. Orphaned works routinely pose problems to innovation. And the constitutional basis for IP protection
But valuing IP is difficult. Enter Harberger taxation. The most convenient side effect is that this requires registration of copyrighted works, and the active payment of a nonzero amount of money. This gets rid of useless orphaned works that have no value beyond being useful in a suit against Google when they digitize it. But second, it also makes the IP market dramatically more liquid. I’ve been meaning to write a sympathetic take on Intellectual Ventures — the Nathan Myhrvold company that’s basically a toxic patent troll and a curse word across Silicon Valley. But the underlying aim of Intellectual Ventures — to make a more liquid market for intellectual property, which would dramatically increase the amount of innovation — is underrated.
Working through some simple objections: first, that the poor single mother who writes a book in the coffee shop can’t afford the Harberger taxes, and speculators who snap up her works will profit off of the next Harry Potter. You can set a ratcheting tax rate. The first 7 years are free. The next 7 are taxed at a low rate, and the tax rate rises to 100% in 50 years. This basically gets us into a smoother form of existing copyright laws (you’ll notice that I said 50 and not life plus 50, so you know where I stand on Mickey Mouse copyright extensions). Second, that rich economic bullies will purchase all the works speculatively before they become hits. This seems… okay? If speculators are going around and purchasing lots of works and paying smaller sums of money for them, that seems more like they’re subsidizing lots of middle class artists, and making it less of a winner-take-all economy.
My final Harberger taxation twist is something that hasn’t been intellectually explored in the vanilla Harberger tax models, because its only really possible with intellectual property. Intellectual property, unlike physical capital, is infinitely copyable at no cost. So the twist is that instead of making it so the buyer pays the Harberger fee and forces a sale, the buyer pays the Harberger fee, and the property instantly enters the public domain. This essentially sets the tax system up as a bounty reward for creating interesting new works, with creators incentive aligned by the Pigouvian tax rates to set reasonable bounties. Since there’s an asymmetric market here — buyers can band together to raise the money to pay the bounty together, we’d probably see lots of properties rapidly enter the public domain. This threat also sets a compulsary licensing fee ceiling (which currently are set by statute in incredibly adhoc ways).
I want to close by going back to my earlier post on why we should be more cautious in setting global policies by international treaty. This style of intellectual proerty taxation is explicitly counter to the Berne convention, and thus dead on arrival. The Berne convention sets “rules of the road” for global coordination, but it also basically sets them forever. We only have one shot at setting IP laws. The marketplace of ideas when it comes to IP laws was killed in 1886. We should be careful what other ideas we kill, and only do so when we have an extremely high level of certainty that they are good ideas.