Economics of intellectual property laws

As reported in the Wall Street Journal, Thailand has strengthened its intellectual property laws.  Long considered one of the worst countries for property laws, the article focuses on the country’s recent efforts in copyright law as related to music. Long considered a hotbed for piracy and counterfeit merchandise, this could signal that one emerging market is ready to grow.

The United States has some of the best property rights in the World.  However, in some cases, even the holders of some US copyrights have found that it is best not to defend them.  As the RIAA has found out, it may not be worth the trouble.  Thailand is responding to lawsuits brought by GMM Grammy, a Thai record label, against local performers who have been playing “…whatever people want to hear”.  These lawsuits are unpopular with the public, who compare the music style to American Jazz.  Music aside however, what might the economic ramifications be if Thailand was actually serious about protecting intellectual property?

Upon closer inspection, Thailand’s copyright laws rank a mathematically impossible 23rd out of 18 in its region. Typo aside, Thailand would seem to be in desperate need of property laws. Research by Keith Maskus shows that they could see more benefits then just the musical innovation.  Intellectual property laws by themselves don’t stimulate foreign investment in developing countries; If that where the case, Botswana would have more foreign investment then Italy.  Maskus’s research shows that while ultimately it is a choice at the firm level about whether to directly invest in a foreign country or not, the level of legal protection must be considered.

If the country can manufacture modern goods, as well as having a market to sell them in, then property laws can provide incentive for foreign investment.   Thailand fits this definition.

Even if the effect of enhanced IP laws isn’t foreign investment, there are still very compelling economic reasons for Thailand to protect its ideas.  Such laws encourage innovation as opposed to imitation, as well as ensure that those responsible for an idea get compensated for their work.  While IP laws can be imposed to early, creating economic inefficiencies, Thailand may have developed enough to warrant some protection, and that is something they should use as a sign of their economic success.

Emerging markets have been taking a beating recently.  Recent political unrest has resulted in a worsening economic outlook for Thailand.  Thailand can reverse this course and return to being the fastest growing economy in the world.  Thailand can do this by focusing on the property rights that matter.  Once the country has its political house in order, its experimentation with music copyrights should be expanded into patents and private property.

 

 

3 thoughts on “Economics of intellectual property laws

  1. jhchamot

    Very interesting. Intellectual property rights would not usually come to mind when thinking about developing economies, but I see now that they are definitely important. And I like the fact that you said they encourage innovation over imitation; very important in growth.

  2. zsalem

    Very hilarious that you found the rank of 23 out of 18 on that site. I hope their copyright protection isn’t really that bad haha.

  3. wyna

    Interesting post. Switzerland had a similar bad IP law issues, but people reacted in such a way that they invested heavily on industries that it is inherently VERY hard to copy such as making watches or running chemical companies like Nestle. But assuming that this will not happen in Thailand, stricter enforcement should be required.

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