Quote:
Originally Posted by Number 3
If for example the lowest cost highest quality producer always wins, unless outside influences change the playing field, then the U.S. can never win. We will never (at least in our lifetimes) be the lowest cost producer and it is exceedingly difficult to differentiate your product on quality. What does differentiate your product is the application of technology and the application of style. Both of these are "intellectual property". So if a low cost producer, and we know Americans LOVE low cost producers or we wouldn't have Walmart, can simply copy my technology or copy my styling then the low cost supplier will always win. If I can not make money from manufacturing my product, and I can't make money from inventing my product, then creating ideas simply becomes a hobby. And hobbies don't pay very well. So we have given up our manufacturing base and everyone is ok with that.
And by your comments I think you are ok then with the knock of handbags, golf clubs, watches etc. that you can buy CHEAP in China? "pssssst, I have the keys to the factory. I can get you that watch for $100. All I have to do is turn on the machines for a few extra minutes" Riiiiiiiiight. Movies, music, art are all intellectual capital. If you write a book, can someone simply copy it and publish it at a lower cost? If your band records a song, should someone be able to copy it and produce it at a lower cost?
Now we have to give up our intellectual capital as well? Or did I miss your point?
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Well, it is not always the "lowest cost, highest quality producer" that wins. That problem here lies with the underlying theory you are using for cost. I seems you're relying on the defunct
cost theory of value. Really, cost is subjective, as denoted by the economists of the marginal revolution and the Austrian school. Here is an example of the problems with the
Cost theory of value. Therefore, you will see that "cost" is not the algebraic sum of all the factors of production plus a little left over for profit, but it is determined by the subjective preferences of consumers.
In regards to the U.S. "never being able to win," I must ask why you are so pessimistic? Regardless, it is not the market's fault for the increasingly anti-business environment being pursued by our government. Also, who said you would be unable to make money? Shakespeare and other composers/musicians done very well for themselves despite living in a world relatively without patents or copyright. Presently, the Grateful Dead has embraced letting people download their music for free, take pictures/videos of their concerts, etc. and is now one of the most successful touring bands of all time. That isn't to say their multi-platinum records is something to sneeze at either. Of course, there are countless other examples of individuals making money without the anti-competitive shield of IP. Again, it would be near impossible for the United States to give up its manufacturing industry; trade is based primarily on comparative and not absolute advantage. Furthermore, you're assuming that every competitor will be able to efficiently organize his company to replicate the same production methods as your own. This is no easy task, which is why a lot of small business fail. Even assuming their abilities to be an efficient entrepreneur is true, you still have not addressed the scarcity argument that economics aims to answer.
The fact is that if anything, IP is only a monopoly on an idea. It only prevents others from competing with the copyright/patent owner. IP is not an incentive but a penalty.