A pretty remarkable contribution from the Wall Street Journal op-ed page today. The subject was the economics of intellectual property, prompted by a coming change to the way the US will measure gross domestic product (GDP). The reason for the change is to better account for “intangibles” — or, intellectual-property wealth.
Starting July 31, the Bureau of Economic Analysis will record expenditures for “R&D and for entertainment, literary and artistic originals as fixed investment,” grouping them with expenditures for software into a new investment category called “intellectual property products.”
In particular, this very bold statement on the part of the authors stood out:
In the past two decades, intellectual property has emerged as the principal driver of economic growth in the U.S. and other developed countries. IP is now, in many respects, the new global currency.
This statement is bold because I’m not sure we know it to be true. That intellectual property is and has been the “principle driver of economic growth” might be true. I think it is true. I think it could even be true that real US intellectual property wealth tops some large number, probably greater than $5 trillion. But I think the statement is beyond what we can say we know. Mainly because sociologists and economists are behind the curve on developing theoretical understandings of intellectual property. For example, Michele Lamont (2012) does not include intellectual property as one of the main eight or nine literatures in the sociology of valuation and evaluation.
Instead, so far legal scholarship has taken the lead.
In the field of intellectual property scholarship, legal studies is far beyond sociology and economics. (One of the authors of the op-ed is listed as “an adjunct professor” at the University of Pennsylvania Law School.)
I will be happy when this assessment is shown to be wrong. A state of intellectual property scholarship dominated by legal studies is detrimental to understanding overall. Treating intellectual property solely as a law is inaccurate from the beginning. Intellectual property impacts social, economic, and political fields in ways that aren’t definable as “laws.” IP’s impacts upon behavior depend on context and change over time.
To be sure, part of the problem is that society and the economy face constraints in properly assessing intellectual property that the law does not. The biggest constraint is intellectual property is not easily accounted for in either social or economic paradigms. The problem is the problem of valuation.
For example: Were Tumblr’s revenues of $13 million that which prompted Yahoo to purchase the blogging platform for $1.1 billion? Or was Yahoo attracted to the company’s harder-to-measure, yet recognizable cultural capital, i.e. Tumblr’s “cool” image? The consensus seems to be the latter.
Yet, despite Yahoo’s seemingly confident $1.1 billion Tumblr valuation, I suspect we are no closer to an objective measurement of the wealth embedded in being “cool,” or, more generally, the wealth associated with various alternative forms of capital. “Cool” is a case of intellectual property shaping society — here to the tune of $1.1 billion — that is neither easily quantifable nor reducible to law. Context, interpretation, and case-study determined the Tumblr price; less determinative were mathematical analyses abstracted from decontextualized data and pre-configured formulas.
That said, questions remain. Will cultural and other forms of capital over time prove amenable to some form of stable economic measurement? Are there intrinsic values we can place on these new capital? Or will the value be apparent only in context? Can value independent of revenues, i.e. outside “monetization,” come to be socially stable, predictable, measurable in some form or fashion?
Does Tumblr’s cool image merely buy it time, until it can monetize? Or does its coolness actually inject it with a kind of capital that is in and of itself valuable and stable?
These and similar questions will structure the foreseeable US economy. Advanced societies will increasingly deal with the question of how to value cultural capital. Economically speaking, we will deal with how to properly valuate the many forms of intellectual property that have emerged and now structure modern-day existence.
A redesigned measure of GDP is only the start.