The (Intellectual Property Law &) Economics of Innocent Fraud: The IP & Development Debate


This note/essay examines the evidence on the effect of stronger IP laws introduced during the process of international IP law harmonization initiated by the TRIPS agreement, on the economic development of developing countries. It has been argued by proponents of harmonization that stronger IP laws will provide a needed boost to the economic development of developing (and even least-developed) countries. Critics of harmonization have argued that stronger IP laws will have the opposite effect. What has been largely overlooked in this debate is the strength of the evidentiary foundation upon which the arguments of both sides depend. Many of the economic arguments of both sides borrow background assumptions from the neoclassical school of economics, a paradigm that has lately come under intense criticism and scrutiny from both current students of economics and greatly respected economists. After briefly discussing the crisis of neoclassical economics and providing a demonstration of the deficiencies in the application of neoclassical modeling techniques to the IP & development question, I examine some of the latest empirical evidence on the question, and then examine the history of the relationship between IP & development. The conclusion of this examination is that empirical evidence does not clearly support either side; rather, a great deal more analysis is required, especially analysis of what one author calls “natural experiments.” These natural experiments are to be found in history, and the historical relationship of IP & development clearly demonstrates, if anything, an inverse relationship between strong IP laws and successful economic development. In light of this result, John Kenneth Galbraith’s phrase “conventional wisdom” is an apt description of the position, well-represented in the community of American IP legal scholars, that the international harmonization of IP laws will help the economies of developing nations to grow.


Commercial Law | Economics | Human Rights Law | Intellectual Property Law | International Law | International Trade Law | Law and Economics | Legal History

Date of this Version

June 2006