Ownership drives innovation. Laws’ governing the ownership rights granted to people is an institution that is essential for innovation. If the government has the power to take away or another citizen has every right to copy and profit off of an innovated good, why would anyone spend the time and money it takes to revolutionize? As we saw in the Lande’s reading, the very basic form of ownership started in the Middle Ages with the merchant, working class. The merchant class leveraged their numbers against the kings and demanded to be compensated for their work. And in a perfectly competitive free market, innovation is foundational.
This simple form of ownership has evolved into ownership of land, houses, property, capital and formulated ideas. But even though some communities started granting ownership rights since the medieval period, there are still countries today that have no basic property rights. Patents are designed to grant a monopoly, on an idea of a good, to people or organizations that spend time and money on researching and developing a new product. This simple law encourages innovation and prevents idea theft. Another explanation for why innovation is prevented Moykr describes is due to resistance to innovation.
With Innovation, there are both winners and losers. The person or firm that successfully innovated would be able to charge a price well over the marginal cost line, increasing their overall profits, the winner. The person or firm that either has not yet found an innovation for a product would be stuck making the same low profits, the loser. The losing agent has an incentive to either block a winning agent from innovation or making a decision after the fact to try and become the winner. This practice is commonly referred to as Game Theory in economics. One of the more recent situations on the political economic battlefield demonstrating this is between OPEC and the oil companies in the United States and Canada.
Look at the OPEC (Organization of the Petroleum Exporting Countries) Cartel. OPEC holds the most market share and therefore controls the pricing in the world demand for oil. After the 2008 recession the prices went from drastically low to ridiculously high. The United States and Canada, having oil reserves in the North American land, began fracking and drilling for oil to decrease imports and keep prices relatively low. As prices remained unchanged at a lower price OPEC, mainly Saudi Arabia, had 2 options: 1. Keep prices high by lowering output, potentially losing market share to the US and Canada companies, or 2. Flood the market with as much oil as possible in effort to drive the price so low the US and Canadian companies can no longer afford to operate, they chose the latter. OPEC was the loser with the innovation of oil production in the US and Canada, but it plans to drive the North American firms out of the market with their political economic chess move.